Emergence of sharing economy gives insurers much to ponder

The emergence and growth of the so-called sharing economy is presenting insurers with challenges and opportunities as they attempt to grasp the way the risks they are covering might be changing, experts from ISO Solutions, a Verisk Analytics business, have warned.

Carly Seaman, an insurance lines specialist for personal auto and umbrella product development at ISO Solutions, noted that an increase in car-sharing can create a number of problems for insurers, often because policyholders are not telling their insurers they are doing this.

“There appears to be a potentially wide appeal for young adults, students, teachers, seniors, and the unemployed to earn supplemental income by transporting passengers using their own personal cars,” Seaman said.

“It may not occur to them to inform their auto insurers that they’re participating. Others may be reluctant to inform their personal auto insurer about their car-sharing activity because of concerns ranging from premium increases to cancellation or non-renewal of insurance coverage.”

This raises a number of problems such as whether personal injury protection (PIP) coverage may apply to the driver.

“Raising awareness for the driver regarding available insurance coverages is particularly important in an effort to ensure that the driver is appropriately covered during all periods of participation, as well as ensuring that claims are handled properly,” Seaman said.

She noted that as of August 2016, approximately 20 states and the District of Columbia have issued bulletins or advisory notices about possible insurance risks that may arise, and at least 38 states and the District of Columbia have enacted legislation or adopted regulations that regulate car-sharing services.

Meanwhile Kevin Poll, director of coverage products and operations at ISO Solutions, noted that a rise in home-sharing is causing similar problems in that market.

“There are a variety of considerations regarding home-sharing from an insurance perspective,” he said. “First, how often an insured is renting out his/her residence is an important exposure consideration. For example, a home occupied by one guest for 30 days could be a very different exposure compared with a home occupied for 90 days or more.”

Poll said insurers see this as a growing concern and are looking for options to underwrite and price this exposure effectively; there’s not yet enough data regarding losses to infer how claims are currently being handled, however.