Seeking cover in the sharing economy

The sharing economy has created a multitude of new ways for people to make - or supplement - their income. But what happens when things go wrong: if someone slips and injures themselves while staying in a shared home, or if a freelance graphic designer is unable to finish a piece of work because of the theft of their computer?

By throwing up these scenarios, growth in platform-based peer-to-peer services has presented a challenge for conventional insurance products, and a significant commercial opportunity for forward-thinking insurers.

One of the most striking findings in our recent research with Lloyds of London, Squaring Risk in the Sharing Age, was just how quickly the sharing economy has grown. In the UK, 9pc or 5 million adults have participated in the supply side of the sharing economy in the past three years, while 28pc would be willing to share their assets or possessions in this way in future.

This kind of growth creates ripples across many areas of our economy, demanding new models and approaches of industries like insurance. As the sharing economy developed from its infancy, platforms developed partnerships with insurers to provide embedded cover centrally through the platform for those supplying goods or services in addition to individually held cover.

But as the sector has grown, the limitations of this one-size-fits-all model are becoming more apparent. There’s a growing gap between what is currently provided centrally and the growing variety of situations which need to be covered, including where liability is a grey area. Users are demanding greater choice and more bespoke options.

Platforms allow people to act as businesses for specific periods of time. If someone spends a couple of hours a day working on administrative tasks through an app like Taskrabbit, they’d potentially need contents cover, liability cover and business interruption insurance, but, given the cost and time involved, won’t necessarily want to research and take out a full annual policy with the right level of cover. Equally, some tasks – assembling furniture or delivering food on a scooter, for example – might come with greater risks.

New solutions are emerging to provide more tailored cover, priced by the day or by the hour, which can be dialled up and down or switched off, automatically in some cases, when an individual isn’t working, to keep costs down. This is an area where insurance start-ups such as Tapoly have developed on-demand offerings designed for those providing services in the sharing economy.

A challenge in developing new products is balancing flexibility for individuals with preventing fraud, ensuring people are covered when they need to be and making the process as frictionless as possible. Reliance upon individuals to turn insurance products on and off each time they start working is fraught with legal and moral risk. Quite simply, it may not be fair to ask people to remember.

That’s why there’s a big commercial opportunity for insurers to work with platforms to develop more flexible options embedded into each transaction, rather than being purchased independently. Our research indicates that the need is greater in some areas than others: while 57pc of sharers overall reported being insured for their activities, for delivery drivers this figure is 37pc, with only a fifth of freelancers taking out additional insurance.

We’ve seen how the sharing economy has transformed the way in which a wide range of services are provided – this demands an equally innovative and flexible response from the insurance industry.