News & Views

Ellie Gummer

The Evolution of Insurance in the Sharing Economy

by Ian Johnson, Chief Operating Officer at Vrumi

Insurance is, perhaps surprisingly, a hot topic right now. And with recent evidence suggesting that the sharing economy is one of the fastest growing business sectors in the UK, it is little wonder that as more people share their car, or their home - in other words, their most expensive assets - many people expect to be able to insure themselves against the associated risks. But, not all insurance products in the sharing economy are equal. So how have we ended up with things as they are, and is there a light at the end of the tunnel?

Initially there was no insurance for sharing economy activities. Everything was based on trust between the users and trust remains a fundamental building block of the sharing economy, and why not? People are fundamentally good on the whole, right? But there are always risks. So enter stage right, the ‘guarantee’ style insurance offered by sharing economy businesses themselves. Probably out of necessity, rather than any particular desire for these businesses to provide pseudo-insurance products, and thus, are offered only once you have jumped through various (often unpalatable) hoops first.

But then came along the umbrella insurance policy offered by sharing economy businesses for their users. Essentially, this means that the businesses are insured in case their users have problems, which is a step in the right direction but there are a few key problems:

  1. The person sharing the asset isn’t the person that has control of the insurance (the business has insurance on their behalf, resulting in a potential conflict of interest).
  2. Overlapping insurance policies result in a lack of clarity over whose insurance is liable. With a fear of affecting premiums on either side, a battle of insurances ensues. This detrimentally affects one person - the sharer.
  3. Aggregation limits exist on these umbrella policies (e.g. up to £1m in a year), so if many other users of that business have made claims in that year, your claim may be valid but still receive no payout from the insurer when you experience a problem.

These issues left me feeling that we could, and we must do more for our customers. I set out to find a product that didn’t require compromise. As a result, the most recent development was revealed with the emergence of the pay-as-you-go insurance product that is owned by the sharer themselves - in other words, the person that takes the risk is in control of their risk. Our hosts can opt in to a £2 / day insurance product that Vrumi have negotiated on their behalf, so that they can be confident that it covers them for Vrumi activities and provides buildings and contents insurance for their home for the full duration of the Vrumi booking irrespective of their existing insurance*. It also has the added benefit of public liability insurance, something which until recently has been almost entirely ignored.

There is further development in the pipeline, as the insurance industry develops new products, and remoulds existing ones to include cover for sharing economy activities. It is essential that businesses in the sharing economy actively engage with the insurance industry to explain the diversity and detail of what our businesses facilitate in order to provide suitable coverage for our customers. We can do this individually, but the greatest impact is likely to result if we combine, so do consider joining Sharing Economy UK to get a seat at the table in the discussions, and engage with BIS (Department for Business, Innovation and Skills) who are looking at how they can help too.

If you’d like to find out more about the Lloyds of London insurance policy we offer our hosts, take a look at our blog; Insurance: How Best to Protect our Sharers