In past blog posts, I’ve discussed how the role of insurance and our traditional risk pools must evolve to remain relevant as the sharing economy becomes even more ubiquitous in today’s society.
An example: With fewer young people owning cars—and with cars themselves becoming autonomous—the old-school business model of selling auto insurance on a depreciating asset that is dormant over 97 percent of the time will become obsolete. The challenging question is, of course, what will replace it?
A recent article in Forbes described the sharing economy as shifting focus from individual ownership to “collaborative consumption” in which owners rent out something they are not using, transforming the traditional business model of producer-to-consumer to peer-to-peer.
For an industry that has made a great deal of money insuring people’s stuff, what happens when they own less stuff? And where has the risk shifted? Clearly these P2P offerings introduce new risks, but who is exploring and mitigating those risks?
By now, everyone knows or has used a peer-to-peer service such as Uber, Airbnb or Snapgoods. Consider these newer examples of the sharing economy that will significantly disrupt the insurance industry—and the economy in general:
- InCloudCounsel: This startup and its army of attorneys can handle the mundane legal work that’s involved in running a business.
- DogVacay: A sort Airbnb for pets, this startup allows dog owners to leave their pets with a host, an alternative that’s cheaper and more personal than a kennel.
- BloomThat: This fast-growing startup is outsmarting FTD by delivering a bouquet of flowers within 90 minutes by offering a simpler selection than FTD.
- Tongal: Goodbye, Don Draper? This L.A.-based app puts customers and advertising specialists together for a fraction of the cost of a traditional ad agency’s services. They even produced a Super Bowl ad for Colgate in 2013 that cost the company only $17,000.
- Skillshare: In what some observers believe could be one of the most disruptive sharing economy models of them all, Skillshare is an online skill-sharing community offering virtual education in classes centered on design and industrial art. The business model’s applications are potentially limitless, and could supplant, or at least supplement, traditional education.
It remains to be seen whether these new sharing platforms will eliminate law firms, kennels, advertising agencies, or our current educational system. What they will do, however, is create new ways for insurance to engage with people, and shift the focus of our existing risk pools to something that hasn’t been seen before in the industry. And, to the extent that we are insuring the commercial interests of these replaced industries, this creates another problem for the insurance industry.
Since the beginning of its existence, when Lloyd’s of London began pooling resources to protect cargo on the high seas, insurance has worked by guaranteeing protection for tangible goods, business processes and people. Although those needs will still exist, the sharing economy is giving us a taste of how things will have to change if our industry is going to remain relevant.
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