Caring About Sharing

The sharing economy – think Uber and Airbnb – has grown exponentially over the past decade. However, Urtzi Grau, Jim Minifie and Allianz’s Philip Heath warn that with new business models come new risks – Martin Wanless investigates.

Traditionally, brokers could look at insurance rather simply. On one hand, there were personal lines, on the other were a vast array of business-related insurances. The same client may well have needed both, and indeed from a clientrelationship perspective, it often paid to help ensure the client’s full range of risk was covered.

Over recent years, however, those two areas have begun to overlap. Thanks to the connectivity enabled by the internet, and the growth of opportunity that’s followed, we’ve seen the rise of the sharing economy, in which people use personal possessions – from a hammer to a holiday home – to earn a few extra dollars.

NEW BUSINESS MODELS, NEW RISKS

When we talk about the sharing economy, the best examples are the likes of Airbnb, Uber and Airtasker. Whether you want to ‘rent’ out your home, car or tools to someone else, you can feasibly do so in a matter of minutes, thanks to a third party facilitating the transaction.

Urtzi Grau, Director of the Master of Research and Director of the Master of Architecture at the School of Architecture at UTS, and co-author of the Future of Living1 report, commissioned by Allianz in partnership with UTS, says “These platforms are basically 10 years old, so they’re still extremely new.

“There’s been two models of backlash – one a rejection of some of these models by some elements of society, and another in terms of attempting to understand and regulate these models of business, and trying to figure out how to do it well.” When new business models emerge quickly, it presents challenges to all concerned – as we’ve witnessed with restrictions on the number of Airbnb properties in some areas, and restrictions on the presence of Uber in others.

“Even the bite-sized transactions you find on sharing platforms such as Airbnb can have big implications for risk,” says Jim Minifie, former Productivity Growth Program Director at the Grattan Institute and current visiting fellow of the Committee for Economic Development of Australia, and author of Peer-to-Peer Pressure: Policy for the Sharing Economy2 .

“Hosts and guests are usually well-behaved, but things can go wrong for them or for third parties, whether it’s injury, property damage or theft. Not surprisingly, they and insurers have been keenly interested in who bears the costs and risks of the sharing economy.”

ATTENTION NEEDED

“It’s an incredibly complicated area of insurance,” says Philip Heath, General Manager of Consumer and SME/ Farm Platform Solutions at Allianz.

“Airbnb and Uber are good examples of where you’re using a domestic item normally used for personal use, for business use.

“On most private domestic policies, you’ll have exclusions or limitations as to how you use that asset for business.”

“Even the bite-sized transactions you find on sharing platforms such as Airbnb can have big implications for risk.”

1 https://www.allianz.com.au/aalaus/aalaus.nsf/docs/future-of-living-report/$file/Allianz_The_Future_of_Living_FINAL.pdf 2 https://grattan.edu.au/wp-content/uploads/2016/04/871-Peer-to-peer-pressure.pdf

“There’s significant risk in terms of damage, as well as liability for injury to third parties.”

Similar risks come hand-in-hand with Uber. Given a vehicle will be on the road for business, a client will need more than the usual domestic cover, as they’re exposing themselves to commercial risk, like loss of business income and again, higher liability exposure.

THE EVOLUTION OF THE SHARING ECONOMY

The rise in popularity of different ways of working is only going to grow – and, thanks to COVID-19, it’s likely we’ll see the number of people working in non-traditional ways increase.

“It’s not just millennials or Gen Zs,” says Heath. “Everyone wants that flexibility in the way they work. You’ve got the technology that can enable it, and you’ve got the increased demand from small businesses and householders who actually want to use the service.” And that demand will only see flexible ways of working increase.

Aside from growth, however, what else does the future of the sharing economy hold? One evolution is a collective approach to construction, for example.

“We’ve been researching a series of collectives that operate at a smaller scale,” says Grau. “For example, The Commons in Melbourne. Basically, people have used the sharing economy concept to cut the developer out of building a building.

“A group of people bring that kickstart thinking; everyone buys into the building and they’re the developer – they operate and make decisions over the design and construction, for example. “It has some major insurance implications, but it’s another example of how technology is changing the way things are done.”

It’s another to add to the brokers’ watchlist – and another example of the new risks your clients are potentially being exposed to, sometimes without even realising it.

KEY CONSIDERATIONS FOR BROKERS

• The demand to work and consume products and services in new ways is growing. Ask your clients whether they’re participants of the sharing economy.

• If your clients are using their personal items to generate revenue, they may need to re-evaluate their insurance needs.

• Ensure your clients are aware that most private domestic policies have exclusions or limitations as to how assets are used for business.

• Clients may be under the impression that the sites they trade through offer adequate cover. You have an important role to play in encouraging them to read the policies so they can determine whether it is right for them.