3 Ways of tackling Insurance for your Sharing Economy Startup
By
Sam Gilbert
Let's get the bad news out of the way: nobody, including Bought By Many, has managed to solve the wicked problem of insurance for users of collaborative consumption, sharing economy, and P2P platforms.
Since 2012, we've had a number of conversations on this topic with both large-scale and specialist insurers in the UK. These have been typified by initial excitement, both at the potential size of the market and at the intellectual challenge of underwriting for disruptive business models. But then, alas, insurance industry inertia has set in. An internal restructure led to one contact being reassigned to other projects. An enthusiastic specialist insurer was acquired by a larger competitor and told to focus on its core business. A major global player cut all investment in new product development to help deliver its quarterly EBIT target... You get the picture.
We will of course keep plugging away. But if you run a sharing economy startup, what can you do about insurance in the meantime? I think there are 3 options.
Option 1: Just don't bother with insurance
This was good enough for Airbnb for many years. In fact, even though they now offer the Host Guarantee, their position is still that they are a technology platform, and that it's down to the users of the platform (the hosts & guests) to arrange whatever insurance they think is necessary. (You can read more here about what Airbnb's approach to insurance means for its users).
Uber takes the same view: their Terms & Conditions require Uber drivers to arrange appropriate insurance, but they have been repeatedly criticised for not doing enough to check that each driver's insurance is in fact valid.
So, if you're running a sharing economy startup, why not take the same approach? Provided your Terms & Conditions make it clear that responsibility for insurance rests with your users, you might not need to worry about it until you're big enough for it to become a reputational risk.
Option 2: Focus on Public Liability
Now, it is possible that not providing any insurance will be a barrier to users adopting your product. Perhaps you've even done user research suggesting exactly that.
In this situation, one option would be to focus on providing only Public Liability Insurance for your users. (This covers accidental injury to members of the public or damage to their property, typically with a sum insured in the millions of pounds.) Public Liability is a relatively straightforward product, and brokers and insurers will find it easier to get their heads around than a bespoke policy that covers multiple aspects of your service for users.
Having a simple Public Liability offering in place might be enough to overcome any user objections you are facing.
Option 3: Ask other sharing economy businesses who do offer insurance how they got it
If you really do need insurance that is specifically tailored to the distinctive features of your service, you will have to arrange it through a commercial insurance broker.
Finding the right broker can be a labour-intensive process, so why not short-cut that by reaching out to other collaborative-consumption-type businesses who already provide a complex insurance product for their users.
We've looked at some examples for room & house sharing, and peer to peer pet sitting in previous posts.
If you have a ride sharing startup, you could ask BlaBlaCar for an introduction to whoever arranged their AXA-underwritten policy.
Finally, there is some good news if your startup is based in Australia. Melbourne-based insurance broker Modern Risk Solutions has a specific service for P2P startups (and good on them for that).
"I still don't get why this is so hard!"
Along with regulators and legislators, the insurance industry is accustomed to thinking in terms of a binary distinction between businesses which provide services, and consumers who use those services. Sharing economy models blur this distinction, so insurance products which have been built on it don't necessarily make sense. For a flavour of the kind of discussions that insurers have when thinking about collaborative consumption, have a read of this blog by Erica Villanueva.
Important note
This post is for collaborative consumption startups who are considering providing insurance cover for users as part of their service. Like all businesses, sharing economy startups also need to consider insurance to cover their own liabilities. In fact, some types of insurance may be a legal requirement - such as Employers Liability Insurance if you employ staff. Thankfully, this is generally much less difficult to arrange - well-known names like Hiscox and Direct Line for Business can help.
