Last month, I had the honor of sitting on a panel about liability and the sharing economy at the Cardozo School of Law in New York City. My fellow panelists represented the sharing economy companies’ and lawyers’ points of view, while I talked about the opportunities I saw for insurers within the space. Here are some highlights of our conversation about the role of insurance in the sharing economy.
- Currently, there are two approaches to insuring risk in the sharing economy. The first: see what others do. The other approach, as embodied by State Farm and USAA’s alignment with one of the leading ride-share companies in the market, is to develop the different layers of ride-sharing coverage that are needed in this segment of the sharing economy.
- Insurers are innovating in response to the sharing economy. For example, Metromile’s Metronome program allows users to track personal and professional use of cars involved in ride-sharing programs. It’s directly linked into the company’s mobile app, so with user input the exact dividing line may be determined for insurance purposes. In addition, Metromile offers per-mile pricing for insurance—an appealing concept for many, especially given that the average car sits idle for 22 hours per day.
- Insurers are interested in being part of the sharing economy. My fellow panelists were curious about this, especially given the initial response by many insurers to watch from the sidelines. I explained that most insurers see a market opportunity in the sharing economy and want to be part of it—but the challenge is in underwriting and pricing trust, which is, to some degree, the currency of the sharing economy. Another challenge is that transactions are temporal, episodic and small—quite different from insurers’ current products and services.
- Increasingly available user information will help insurers better understand risks in the sharing economy. To take a more active role in the sharing economy, insurers need to effectively cordon off or create new unit of risk, and price and cover it correctly. Purely from a technological standpoint, connected homes, devices and wearables will help insurers better understand customer behaviors. That’ll lead to a more precise understanding of the risk so they can price and bake it into the cost of a (micro)premium when people use a sharing economy service.
- The next wave of insurance products will be incredibly small. I spoke to the likelihood that we’ll start to see products that are small and specific—for example, a premium of 12 cents for 38 minutes of coverage—and that the coverage will be orchestrated alongside more traditional insurance products. If insurers can determine a way to dynamically assess and price these microtransactions, and accumulate enough of them within their portfolios, they can be profitable in the sharing economy.
- The sharing economy is here to stay. Shifts in the auto industry—the commoditization of pricing or the movement toward the driverless car, for example—are prompting many insurers to consider new lines of business. Products to address needs in the sharing economy are a natural answer, and I wouldn’t be surprised to see a level of product innovation that will be heavily enabled by technology.
Thanks to my fellow panelists for a great conversation: Michael Hershfield of Kitchensurfing, Michael Klein of onefinestay, Jim Rosenfeld of Davis Wright Tremaine LLC, Adi Vaxman of Tripda and Marc Zwillinger of ZwillGen PLLC. And many thanks to Kai Falkenberg for moderating and organizing the panel, and to Cardozo School of Law for the opportunity to speak.
If you have questions about how Accenture can help insurance carriers innovate in the sharing economy, please email me.