How to insure your business in the sharing economy
Business insurance may not be the sexiest of topics, but brave new ventures mean it’s never been more fascinating, writes Rebecca Burn-Callander
Insurance. The least sexy word in business. But when it comes to the survival of any new company or nascent industry, without proper cover, investors and banks will balk and customers will eventually fall away.
The sharing economy is a case in point. It’s a bold new marketplace that connects consumers with extra space, cars or tools with the people who want to borrow them. The sector has exploded in recent years and PwC, the accountants, reckon that the sharing economy will be worth $335bn by 2025.
But when you’re sharing goods or opening your home to paying guests, how do you protect both parties if something goes wrong? If your holiday home is burgled while an Airbnb guest is staying there, is it the guest’s insurance that comes into play or yours? How do you price this insurance, when a home might have 100 different people staying there in a year – but it is not a hotel?
There have already been high-profile cases of Airbnb landlords finding their homes trashed, and the US giant has invested heavily in a legal team to work out the snarls. Traditional insurers have also tried to put together solutions, but many are expensive and not fit for purpose.
Uber’s insurance changes depending on whether the driver is on the way to a pick-up or carrying a passenger, for example, and this creates an extra layer of complexity.
Debbie Wosskow, who runs a sharing economy business herself – Love Home Swap – and is also the chair of trade body Sharing Economy UK, told me late last year that forward-thinking insurance start-ups will bring the next wave of technological innovation.
“New ventures aren’t just creating opportunity for themselves, they are also generating income for the traditional insurance industry”
This prediction has already been borne out in a number of interesting deals. Take Slice, a US start-up offering insurance for on-demand workers and providers, which has sealed deals with rideshare drivers and homeshare hosts. It raised $3.9m (£2.75m) in growth capital at the end of last month from Horizon Ventures and XL Innovate.
Alex Macpherson, head of UK early stage investor Octopus Ventures, told me last week that his fund is actively seeking out innovators in the insurance space. “We’re interested in insurance technology as an industry that we think hasn’t yet had same number of businesses look to address it,” he said.
Interesting deals are now being brokered all over the world between sharing economy businesses and the companies that have worked out how to insure their new and strange models.
Vrumi, a London-based start-up that connects professionals needing work space with householders who have rooms, is now working with insurance start-up SafeShare Global to fix what Vrumi founder Roddy Campbell calls “the biggest practical problem” facing the expansion of the sharing economy.
Safeshare uses “blockchain” technology – another hi-tech buzzword which refers to the ability to record accurate digital events – to protect homeowner and customer by creating “an undisputable record of the insured through a distributed network of proof”. It’s a new way to tackle the issue – one of many experiments currently underway.
What’s exciting about all this is that these new insurance ventures aren’t just creating opportunity for themselves, they are also generating income for the traditional insurance industry; SafeShare’s policies are underwritten by Lloyds of London. It’s a way to modernise an old industry while capitalising on its infrastructure and strict controls.
Insurance may never be sexy, but it’s never been more fascinating.