Lloyd’s drives attention to sharing economy insurance potential

The sharing economy has grown exponentially, fundamentally changing the business landscape, and insurers must think beyond traditional products and services in order to effectively meet the needs of the shared economy, according to a Lloyd’s Emerging Risk Report.

The report produced in collaboration with Deloitte calls attention to the role of the insurance industry in supporting shared platforms as they grow and develop.

The study of six key markets – China, United Arab Emirates (UAE), Germany, France, UK, and US – shows that more than a quarter of the population has either bought services or rented possessions from their peers via shared platforms in the past three years.

Approximately 500 million people share assets or services across these six key markets, and close to 680 million people make use of them.

On average, about 57 percent of adults who have sold services or lent products in the sharing economy in the past three years were insured by transaction-embedded or personally owned cover.

The report also estimated a potential for double digit increases in the percentage of the population willing to share services or assets.

“Sharing economy platforms have transformed entire industries because they’ve rejected the status quo and challenged the way we think about once traditional goods and services,” said Lloyd’s head of innovation, Trevor Maynard.

“In order to effectively serve the sharing economy, we as insurers must follow that example and rethink traditional insurance products," Maynard added.

“The report highlights that transacting in the sharing economy is not without risk and adequate protection for all parties means insurers must continue working to adapt traditional coverages to fit the unique needs of this sector, whether it’s solutions provided by platforms via transaction-embedded cover, or a product purchased independently by sharing economy participants.

“A range of insurance products currently offered cover potential risks such as losing a possession, facing liability or suffering damage, among others. Despite these risks, the positive experiences and benefits provided by the sharing economy, mean that it continues to grow and diversify. The opportunity for sharing economy platforms and the insurance industry to work together is clear,” Maynard said.

While more than one in four people across the six countries surveyed has been a consumer of shared goods or services, the penetration rates differ considerably by country yielding notable geographic insights:

In the US, the birthplace of the sharing economy, sharing is less widespread than it is in China and the UAE, for example. China is the stand-out market for shared goods and services. Almost three quarters (73 percent) of the online population are consumers and just over half (55 percent) supply goods and services to it – more than double the figures reported for the US and European markets.

The UK has the lowest sharing economy participation levels on both the supply and demand sides. Less than one in ten (9 percent) have shared in the past three years, which is ten percentage points less than European neighbour Germany.

Nigel Walsh, partner in Deloitte Digital said: “In our market scanning, we’re not only seeing an increasing number of sharing economy platforms provide insurance to their users, including bespoke products through the Lloyd’s market, but also a large number of startups helping to solve the insurance gap for all participants in the sharing economy.

“Equally, insurers are still in the very early stages of developing the dynamic and flexible solutions this sector needs as it continues to evolve at pace. The opportunity for sharing economy companies and insurers to partner to reduce risk in this space has real implications and exciting opportunities for future growth,” Walsh noted.