The potential to come home to find your house trashed is every Airbnb host’s nightmare. It’s not unknown to happen with one London user recently finding their New Year’s Eve ruined by a guest who decided to turn their flat into a nightclub. These kinds of incidents often attract media attention to the accommodation-renting platform and drag up a question that hangs over much of the sharing economy – who’s responsible when things go wrong?
Collaborative consumption, from Uber to crowdfunding, is based around trust and when high-profile cases rattle consumers many companies suffer. This is prompting a new wave of startups to build the background services that the sharing economy needs to grow. These include the likes of background checking platform for sharing economy workforces Ofido, which raised USD4.5m last year, as well as startups looking to rethink insurance for this disruptive new industry.
“The sharing economy has come out of nowhere and insurers are just getting their heads around it,” says Alex Steinart CEO of sharing economy-focused insurance startup SafeShare. “Traditional insurers use a broad brush and either cover personal life or businesses without any cross over.”
Now insurance firm Aviva is getting into the space with its Canadian arm preparing to offer a policy specifically for drivers using their own vehicles to work for ride sharing and carpooling services, such as Uber and Lyft. It comes as Toronto begins to rewrite its transport laws with these new services in mind. The presence of a high-profile insurer in the space offer validation to the industry and European long-distance, ride sharing firm BlaBlaCar also works with Axa to offer its users policies with insurance in mind. In an industry built on trust providing piece of mind for users is a must and to that end insurance’s role will only grow.
Big Expectations
Led by the soaring growth of Uber and Airbnb more consumers are looking to sharing economy and collaborative consumption services, accessed through mobile apps. Investors clearly have a lot of faith in these services, with Airbnb and Uber reportedly sitting of respective valuations of USD25.5bn and as much as USD60bn. Many forecast massive revenues for sharing-based business models over the coming years.
> PWC estimated that the sector could generate USD335bn globally by 2025.
> The UK’s cut of that could be as much as USD15bn.
However, to meet these lofty predictions the industry needs to clarify grey areas such as government regulation, the status of employees and insurance.
Insuring The Sharing
The sharing economy is held back by grey areas such as what taxes users are susceptible to, with Airbnb only recently beginning to collect tourist taxes. The company also now offers a guarantee for damaged goods of up to USD1m that users can apply for. Steinart highlights new approaches to insurance as a force to encourage participation in the sharing economy.
Insurance is a space poised for significant disruption this year as fintech entrepreneurs turn their signs on disrupting its outdated systems. Insurance still generally works on an annual payment model and as data-driven businesses, insurance firms are unprepared for an industry that has emerged so rapidly. The disruption of insurance is expected to massive and lucrative and there’s a real role for sharing economy companies to help shape its future.