Insurance Adviser takes a look at the sharing economy and the opportunities, and challenges, it offers brokers in the public liability space.
Current estimates value Australia’s sharing economy – which includes peer-to-peer (P2P) platforms such as Uber, Airbnb, Gumtree and eBay – at $15.1 billion, according to latest research from RateSetter’s Sharing Economy Trust Index.
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And its growth is only tipped to accelerate, with the market for P2P services projected to reach $55 billion by 2021 – nearly a fourfold increase in as many years.
And that’s good news for brokers, according to joint Managing Director of Modern Risk Solutions Geoff Stooke, because public liability issues in particular are set to throw insurance curve balls at emerging businesses that brokers are perfectly positioned to solve.
It’s very rare that a client comes to us and says, ‘I’m after public liability’ – we actually have to fish it out of them.
“We’ve been able to solve a lot of complex problems in this space,” says Stooke.
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But another noteworthy mention is assisting P2P platforms that promote the sharing of spaces.
“So people who might have a spare desk or spare office, they can deconstruct the usual process of leasing and go to someone direct,” explains Stooke.
In this instance, one handy tool for brokers to tap into is the cross liabilities clause, says Stooke. It’s a historical clause once used for businesses with lots of contractors, but it can be customised for the P2P public liability market.
“It’s where you’ve got a situation where two parties are beneficiaries to the cover, but they have equal rights and interests in the policies as if they were separate,” he explains.
But what we’ve found is that you need to engage with insurers early on and get them engaged with the client to assist with the development of the processes and procedures.
“That’s particularly important in P2P where you’ve got a two-sided market. It allows them to both be beneficiaries of a policy, but obviously both have equal rights and interests in the policy, against each other.”
Get in the driver’s seat
RateSetter estimates that 10.8 million Australians will earn money from sharing economy services in the next six months, representing roughly 60 per cent of the nation’s entire working population.
In the survey of 1,000 Australians, more than a quarter (27 per cent) of over-55s reported they use sharing economy earnings to improve their lifestyle. In fact, they almost make up half of the people earning money in the new marketplace (44 per cent).
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Here’s the real kicker for brokers: older generations are much more likely to understand the importance and need for additional insurance protection, says James Skiadas, Principal of IMC Insurance Brokers.
“The more mature drivers, they’re the ones who are more concerned about their public liability risk responsibilities,” Skiadas says.
Already a specialist in insuring professional limousine drivers, Skiadas has created a public liability facility for Australia’s 20,000+ Uber drivers for an additional $10 a month due to the uncertainty surrounding coverage (see breakout on page 32).
“It’s a small price to pay for peace of mind,” says Skiadas.
Speed bumps ahead
Skiadas says his product has experienced 100 per cent growth each year since launching in 2015, but the journey hasn’t been without its challenges.
The first is that Uber doesn’t advise its ‘driver-partners’ to take out additional public liability insurance policies, he says.
Risks are declining because we’re starting to see a trading history and a lot of the market places are highly curated now.
“It’s very rare that a client comes to us and says, ‘I’m after public liability’ – we actually have to fish it out of them,” he explains.
The other problem is that in some states ride sharing services aren’t yet legal – and in the ones that are, there’s a severe lack of regulations.
“The politicians and decision-makers need to either lower the cab driver’s fees, or increase the Uber driver’s fees. But they all need to be carrying the proper insurance,” Skiadas adds.
Dr Jim Minifie, Grattan Institute Productivity Growth Program Director, believes all state and territory governments need to set minimum insurance requirements for ride-sharing drivers, including public liability insurance.
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“Governments do have a role to play in ensuring the P2P economy can flourish,” writes Dr Minifie in the Grattan Institute report “Peer-to-Peer Pressure Policy for the Sharing Economy”.
“Other states should follow the lead of New South Wales, the Australian Capital Territory and Western Australia and legalise ride-sharing. They should mandate safety checks and insurance for ride-sharing.”
Signs are positive, however, as more and more insurance companies are seeing the potential of the sharing economy – even if some state governments continue to drag their feet.
Australia’s biggest insurer, IAG, threw its weight behind the sharing economy when it launched ShareCover for customers listing their houses or rooms through online marketplaces like Airbnb and Stayz.
The insurance giant boasts that the product offers homeowners the opportunity to purchase “real insurance” for as little as $5 each night a paying visitor stays, offering additional protection against personal liability, theft or attempted theft, accidental damage and identity theft.
Stooke is optimistic we’ll only see more insurers enter this space in the years to come as they determine more accurate and efficient ways to assess risk.
He adds that one of the biggest challenges will be striking the right balance between providing insurance companies with enough information to accurately price risk while not impacting customer user experience – which is what P2P businesses are built on.
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“Risks are declining because we’re starting to see a trading history and a lot of the market places are highly curated now. There’s also a lot of social proofing going on,” says Stooke.
‘Social proofing’ or informational social influence is approval from current users of a product or service which includes customer testimonials, case studies, and online reviews. P2P businesses often have inbuilt rating systems for both buyers and sellers to ensure that users get access to the best that the site has to offer.
Importantly, Stooke adds, all parties involved in the P2P space are increasingly looking to iron out any public liability issues early on.
“What I’ve been really pleased about is that insurers are willing to work with some of these emerging companies to get that right from the start on public liability,” he says.