Auto Insurance And The Sharing Economy In New York: Peer-to-peer Coverage – Sharing economy platforms have transformed the way people interact, communicate and share resources. Yet, many people are uncertain about the potential risks and threats posed by engaging with the sharing economy.
In a Lloyd’s of London industry study, half of US respondents had never used a sharing economy platform, citing concerns about personal safety, property damage and lack of safeguards. While 97 percent thought sharing financial services were insured in some way, less than a third had checked this assumption before using a sharing financial service.
Auto Insurance And The Sharing Economy In New York: Peer-to-peer Coverage
Insurance is important in the sharing economy to build trust and credibility. To do this, however, insurance companies must identify, evaluate and address a number of risks.
Special Section: Sharing Economy
From medicine to children’s toys, many products enter the economy only after passing rigorous analysis for safety and efficacy. Sharing economy platforms, however, have been launched and grown without such scrutiny. According to researchers Koen Frenken and Juliet Schor, this leads to situations where externalities are not well understood, creating significant negative consequences.
Directly sharing one’s residence or vehicle leads to situations where safety laws or regulations can be disregarded, introducing another new variable to risk assessment. For example, an October 2014 report by the New York Attorney General found that 72 percent of Airbnb rentals within New York City violated at least one applicable housing or zoning law.
Airbnb disputed the finding. “Every house, apartment, co-op and living space in New York is subject to a myriad of rules, so it’s impossible to make a blanket statement like this. It’s because of that kind of uncertainty and lack of clarity that we’re advocating for clear, fair rules for home sharing,” Airbnb spokesman Nick Pappas said at the time.
Meanwhile, owners of homes and vehicles enter the sharing economy without a clear understanding of what accidents, injuries or damages are covered when their home, vehicle or other assets are used by others.
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“What most people don’t realize is that, in most cases, their standard home or landlord insurance policy doesn’t cover loss or their liability for these types of short-term opportunity activities,” says Louise Birritteri of Inlet.
Housing, zoning and other regulations can be complex, but insurance companies have long handled these legal requirements in their risk assessments. As sharing economy platforms move away from compliance with existing laws, insurers will need to balance new demands and concerns.
Sharing economy platforms build trust between strangers in part by sharing information about each participant. While this information and the trust it engenders is essential to the success of the sharing economy, it can create bias-related problems, said Niamh Yargi and Shamika Ravi at Brookings India.
For example, a study published in Advances in Consumer Research found that Airbnb guests used a host’s personal photo more often than photos of the rental or reviews to evaluate the host’s trustworthiness. Hosts with more credible photos receive higher listing prices and are booked more often.
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Furthermore, in an analysis of 125,000 Airbnb listings, researchers Mehmet Cansoy and Juliet Schor found that Airbnb rentals in areas with higher incomes and a higher proportion of white residents experience higher prices and higher demand. Tends to collect mediocre and low reviews.
Subjective expectations of sharing financial services can alter risk perception. A research study presented by Jérôme Mallargé at the IAJBS 23rd Annual World Forum found that consumers are more tolerant of poor service when engaging with the sharing economy than when engaging with traditional businesses.
The study identified empathy, trust and shared similarities between customer and service provider as the basis for acceptance of low quality customer service. In other words, customers are more likely to put up with poor service because they see themselves in the service provider, instilling a sense of generosity.
This sense of tolerance and generosity changes the way insurance consumers and covered individuals approach risk. Understanding these behavioral changes is essential for insurers who want to fully understand the implications of the sharing economy on their business.
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Insurance in the sharing economy increases trust, making individuals more likely to participate in it. Trevor Maynard, head of innovation at Lloyds of London, says changes in various industries spurred by the rise of sharing economy platforms will put pressure on insurance companies to change the way they underwrite.
The sharing economy “relies on emerging technologies with insurance to provide market participants with a safety net and peace of mind,” says Tshidi Hagan at Startupbootcamp.
For example, drivers are more likely to use their vehicles on ridesharing services if they know that accidents or damages during those rides are covered, and riders are more likely to use ridesharing services for transportation if they know that any damage they suffer is insured.
“Sharing economy companies are not only buying insurance to protect their balance sheets but also to build credibility and trust with stakeholders, including customers, investors and regulators,” says Lloyd’s chairman Hank Watkins.
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Companies offering insurance in the sharing economy can, therefore, find opportunities to build visibility and trust with their customers.
Despite some setbacks, the sharing economy will continue to grow over the next decade. Insurance companies can stay abreast of this growth by focusing on two key areas: ridesharing and data privacy.
Ridesharing is uniquely positioned to address increased transportation pressure in urban centers. In the future, this area of the sharing economy could transform from a focus on shared rides to a service for mobility, says Julia Stein in an article in The Globe and Mail.
The entry of some existing businesses and organizations into the ridesharing sector will support the repositioning of ridesharing as a service to mobility. For example, the American Automobile Association (AAA) and Avis have both started car sharing ventures.
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Existing businesses diversifying into sharing economy sectors are “presented with risks they may not have previously thought about in their risk management program,” says Scott Chrisvoy of Old Republic Risk Management.
As such, sharing economy companies that diversify their own offerings take on new and unprecedented areas of risk.
As with many digital innovations, data security and privacy remain concerns in the sharing economy. The same data that builds trust and enables participation in the sharing economy can be stolen or turned against the participants who provide it, says Danica Sergison at Privacy News Online.
Insurance companies often face the risks of data breaches, which not only affect their own internal data but also the homes, properties or vehicles they insure. As security breaches become an important part of existing risk assessment, new calculations and products will be created for insurance products, says ThreatPost’s Chris Brooke.
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Evaluating insurance risk in the sharing economy requires insurance companies to consider new ways of consumer behavior and digital and technology-based trends. Addressing these risks proactively helps build trust and supports the adoption of the sharing economy. The sharing economy is all the rage these days. And why wouldn’t it? This is a great way to save money and resources in an environmentally conscious way. There are so many opportunities to get involved. But what is it? And how do you get started?
The sharing economy is a way for communities to share their resources in a sensible way. And thanks to the Internet, the concept of community has gone global. We can now share almost anything with the click of a button.
We can trade used clothes, stay in people’s homes, ride in someone else’s car, and do it all safely and legally through apps like Vinted, Airbnb, and Uber.
You are already involved in the sharing economy in one way or another. Whether you took an Uber, bagged bread via Olio, or borrowed a friend’s car, you shared resources and thus participated in this old-less-new approach.
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The sharing economy is basically the 21st century version of Woodstock: it’s a movement that brings people together to share resources and experiences in a fun, positive way.
We are living through a climate emergency. Sharing resources is more important than ever. Young people are positioned to lead the charge in the sharing economy – a bold, climate-revolutionary movement to share resources and reject ownership to save the planet.
Sharing economy companies in the five sectors most affected by this new trend earned $15 billion in 2013, and they are estimated to earn $335 billion by 2025. Sharing economy applications and businesses are gaining ground as the traditional operating model declines.
In 2013, traditional businesses earned about $240 billion compared to $15 billion earned by similar sharing economy businesses. But by 2025, both models are projected to have an equal share of the pie, earning $335 billion respectively.
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To illustrate the growth of the sharing economy, we created these two pie charts inspired by this PWC report.
The sharing economy reduces consumption, saving money and resources. This is
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