The sharing economy is projected to grow to reach $335bn by 2025, creating opportunities for insurance companies to cover new forms of risk

Ridesharing is a major component of the sharing economy (Credit: Unsplash/ Thought Catalog)

Continued growth of the sharing economy is creating gaps in protection that need to be addressed by the insurance market, says one analyst.

The analyst, who works for market research firm GlobalData, warns that while this creates opportunity, insurers not adapting to emerging models in the sharing economy risk losing share in the wider insurance market.

Established insurers, such as AXA and Allstate, have developed products for the sharing economy, while some of the coverage gaps have also been addressed by start-ups including Metromile and Pikl.

GlobalData senior insurance analyst Beatriz Benito said: “Companies such as Airbnb and Uber have largely revolutionised the hospitality and transportation industries — but their quick growth has posed challenges to insurance.

“Typically, the industry had distinguished between personal and commercial products, but the sharing economy blurs the lines as marketplace platforms are enabling consumers to share their belongings or services for commercial activities.”

One of the most successful examples of a sharing economy business model, Uber went from being a start-up to operating in 250 cities in five years — and it has several competitors bringing in more drivers, all of which require a new approach to coverage.

uber insurance
Uber is one of the most successful companies in the sharing economy (Credit: PxHere)

Accountancy firm PwC predicted in 2014 that the sharing economy would grow from $15bn to $335bn in 2025.

“Consumers are bound to continue using sharing economy platforms, incentivised by greater accessibility and more attractive prices,” said Benito.

“This signals that there will be new opportunities for insurers in other emerging models, for instance, the sharing of e-scooters as a transportation method is gaining traction in several countries.

“Insurers will be required to develop their products, but the rapid success that the sharing economy has had so far will continue encouraging the industry.”

 

How do insurers currently serve the sharing economy?

Incumbent insurers that already have established lines of business are taking an interest in the sharing economy by developing new products in-house or giving their financial weight to insurtechs with technology and business models made to suit specific areas.

According to Benito, some incumbents have responded to the growth of the sharing economy by creating add-on products packaged with existing policies, with several offering ridesharing coverage that can be added on to a driver’s personal policy.

“That way, a driver using their vehicle for commercial undertakings on an occasional basis through the likes of Uber and Lyft can be covered, avoiding the larger premiums associated with commercial policies,” she said.

Benito mentioned AXA, Allstate and Zurich as three incumbent insurance companies that have developed coverage for the sharing economy “to a greater or lesser extent”.

She highlighted two start-ups that have played a role in addressing the insurance gap left by the sharing economy, including Pikl, which covers landlords against the risks not addressed by Airbnb’s insurance policy.

The other was Metromile, which recently ended a partnership commitment started in 2015 to insure Uber drivers, and signed a technology deal with Tokio Marine to transform its claims process.