Even though we all know how important insurance is, nobody truly understands it or wants to. The average person doesn't want to go digging around and making sure that their assets are covered, they want to believe what is told to them. This is the first, in a series of insurance blog posts, that will discuss Wheel Estate's insurance coverage and explain why other peer to peer marketplaces are being creative with their insurance coverage. It will help you understand why insurance is so challenging and how we are keeping you safe.
The sharing economy is becoming more mainstream everyday. Leading this growth around the globe is platforms like Airbnb, Uber, and Turo. This new economy, also known as the “You Economy,” takes the power away from big corporations and puts it back in the hands of individual people. This new economy has grown enormously in the last five years: a 2016 report by PwC estimates that peer-to-peer platforms generated $4 billion of revenue and facilitated $28 billion worth of transactions in 2015. PwC forecasts that global revenue could reach $335 billion by 2025. That is a game changer.
For a lot of the peer to peer models, insurance plays a critical role in keeping users and their assets safe while they use the platform. We knew before we started Wheel Estate that insurance, above all, was critical to our users and the long term success that we wanted them to have. People need to not only trust each other but they need to be able to trust that the platform they are using will help protect them in case something goes wrong.
We knew early on that most of our potential users would have reservations and concerns about safety while renting out their trailers on our platform. This same concern is shared across many platforms in the sharing economy. In fact, a 2015 PwC report stated that, among those who had tried sharing in the US, 57% said: “I am intrigued by companies in the sharing economy but have some concerns about them.” In the UK, 75% of sharing economy users consider insurance to be important when using said services. It is not surprising that insurance remains the “biggest challenge” in the sharing economy today. It is not uncommon to see platforms that are similar to Wheel Estate, who are operational and do not have any insurance policies in place to protect their members assets. This leaves users of those platforms at huge risk to personal liability and lack of coverage to cover losses to their rented trailers or bodily injuries to their guests.
Squirrel....... are ya still with me?
People generally don’t understand the risks when engaging with a peer-to-peer platform and in particular rented trailers. Users are often left uninsured or underinsured. Standard insurance policies are usually not fit for occasional sharing practices. In addition, sharing economy marketplaces struggle to obtain insurance for themselves or their users because they do not have an “insurable interest”, i.e. they don’t own any inventory that can be insured. To date most insurance companies will not insure peer to peer models. Most platforms operate solely on trust between users. While trust remains critical, the sharing economy has a unique set of risks which drive demand for new, innovative insurance solutions that currently don’t exist. Some peer to peer businesses are responding by offering so called guarantees or providing suggestions to users on grey area insurance riders or other products. “Insurance gaps”, however, still remain, and most suggestions are empty promises and simply aren’t true. On most platforms the people who share their assets have few contractual protections and are, to a large degree, reliant on the good faith of the platform that they listed on. In most cases if you read the terms of service (if they have one listed) it is unclear what the platform’s duty of care is to their users actually is.
Before we would launch Wheel Estate to the public, it was imperative that we had an insurance protection policy in place for anyone who decided to list or book a travel trailer. In order to overcome the insurance limitations we had to think creatively about the most appropriate solutions for our members. We knew we had to be proactive in ensuring our users were covered every trip no matter what, instead of other platforms out there that are reactionary, dealing with claims once they happen. We aren’t sure how you can deal with an insurance claim when you don’t have the insurance to put in a claim!?
Although the number of companies that offer insurance in the sharing economy is growing, there are only a handful that participate in the peer to peer models.
Technology meets Insurance
The problem with technology platforms when they enter the real world is insurance. The tech industry has this rally cry, “move fast and break things.” This is an ok approach if you are talking about things like design or pages and layouts of your website. However, when it comes to protecting users and their personal assets on a platform, investors and tech founders are at odds with the slow and cautious approach of the insurance industry. With traditional insurance, you know what you are insuring, who is using it, and why, so the broad risk profiles are consistent over time. Those assumptions break down in the sharing economy, where individuals act as microentrepreneurs, switching seamlessly between personal and commercial use. Insuring the sharing economy therefore requires a unique insurance product design.
Platforms who do not have an insurance policy in place are trying to learn how to mitigate the risks and problems as they go along. We feel that this is the wrong approach. There have been many high profile incidents in the sharing economy which have proven the point of requiring a backstop for the protection of everyone. Such events solidified Wheel Estate’s decision to act early on and before the site was even created to seek out the largest insurer in the world and create its own $1M Trailer Protection Policy at no cost to it’s trailer owners.
The Sharing Economy and Insurance Regulation
The legality of many sharing activities is ambiguous. Issues remain around tax liability, regulatory compliance, and the contractual relationship between consumers, users, and the platforms that facilitate sharing. As a result, it is unclear which party is liable and therefore requires appropriate protection. This is further complicated by jurisdictional challenges—the platforms are usually based in one country but provide their service to consumers and service providers in multiple countries. There is a lack of harmonization between jurisdictions and regulatory frameworks, which makes compliance with the law costly and time-consuming, and restricts business growth despite consumer demand.
Many insurers do not have the geographical reach to cover these cross-border risks. Commercial liability policies issued to the platform may be inappropriate to cover risks associated with the users of the platform, therefore requiring policies to be issued to every individual user in each jurisdiction. As a result, traditional insurers often have a limited interest or appetite for the cost and complexity involved in providing appropriate insurance solutions for sharing economy platforms.
You found Wheel Estate for a reason and now you can rest easy, knowing we’ve got your back and trailer covered.
Stay tuned for our next blog post on insurance where we...... wait for it........... speak to one of the companies involved in writing the policy for Wheel Estate. Really though it will be super interesting!
If you have any questions or comments we would love to hear them.
♥ Wheel Estate