Popularity of sharing economy businesses requires movement on specialized coverage: IIC
These businesses require protection of property used for both personal and commercial purposes
“Sharing platforms and their participants typically seek insurance that differs from conventional coverage, blurring the traditional distinction between personal and commercial coverage,” states the report, entitled Sharing economy: implications for the insurance industry in Canada. “Over time, this emerging market will grow in importance and value, presenting an opportunity for the insurance industry in Canada.”
Individuals who use their personal property to provide a service seek insurance coverage that is flexible enough to recognize the dual purposes of that property. However, insurance coverage for drivers or homeowners typically does not extend to commercial purposes – although those drivers or homeowners may be using their property to add to their income by participating in a ride-sharing or room-sharing arrangement.
Insurers are recognizing that traditional coverage and underwriting processes must be modified to provide insurance protection that will fit the specific circumstances of individuals, the report states.
For instance, Intact Insurance and its subsidiary, Belairdirect, are the Canadian insurance partners of Turo, which is a U.S.-based peer-to-peer car sharing company that launched in Canada in 2016.
“Traditional insurance coverage is required when the vehicle is not offered for rent, but specialized coverage automatically comes into effect when the vehicle is made available to a paying customer,” the report states. “Availability of insurance protection is essential if Turo is to attract vehicle owners to participate in this venture, and being able to showcase insurance partners was a critical part of the launch of this service in Canada.”
Any development of similar insurance coverage that is appropriate for sharing providers has come from individual insurers and not the industry as a whole, although the study notes that insurance companies in Quebec did come together to produce room-sharing coverage.
Overall, the lack of an industry-wide initiative to develop this new type of coverage means that the coverage offered often varies between companies, which can make it difficult for consumers and insurance intermediaries to assess any differences between policies offered by different insurers.
Working together as an industry to develop future products specifically for Canadians who participate in the sharing economy is a key focus of the report’s recommendations as to how the P&C industry can better serve sharing platforms, providers and consumers.
The report specifically recommends that the industry prepare a sharing economy readiness assessment to identify how products will be developed and the common language that will be used to best describe the unconventional needs of sharing providers.
It also recommends that a forum be established in which those who participate in the sharing economy can express their insurance needs and expectations. In addition, the industry should partner with other stakeholders, including sharing organizations and governments, to study the current and expected future state of the sharing economy in Canada.
The report was authored by Paul Kovacs, the founder and executive director of the Institute for Catastrophic Loss Reduction and president and CEO of the Property and Casualty Insurance Compensation Corporation. The full study and its additional recommendations can be found on the IIC’s website.