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Sharing economy offers insurers lucrative new revenue streams
In her groundbreaking 2010 book, What’s Mine Is Yours: The Rise of Collaborative Consumption, Oxford University professor and trust expert Rachel Botsman argues that we are “wired to share”. The popularity of ride- and room-sharing companies has proven Botsman right.
In 2014, the global sharing economy generated $14 billion in business. It is forecast to top $335 billion by 2025, a reflection of how fast the market is growing.
A recent report from the US insurance and financial services company Country Financial showed that three in five Americans earning money through the sharing economy haven’t purchased additional insurance to cover themselves. That suggests a lot of potential for growth, and insurers can tap into this huge market by creating innovative, relevant and affordable products.
Wanting to embrace a trend in which people are reinventing how they consume goods and services, insurance companies are offering flexible solutions to meet the needs of the sector.
How the insurance industry views the sharing-economy market
Accenture looked specifically at sharing economy offerings as part of our 2018 Technology Vision report, polling hundreds of insurance executives on their readiness to embrace change.
We found that nearly half of all the respondents, or 44 percent, planned to enter the market as they thought it had a very good potential. Twenty-two percent had already entered the market, while 27 percent were considering it. Six percent were aware of its potential, but were not ready yet to enter the market
Sharing-economy insurance in action
In 2017, the Insurance Institute of Canada published a study spelling out what the industry should do to meet the challenges of the sharing economy. The report made five proposals, including a call for a sharing-economy readiness assessment to identify how the industry will develop products.
There are barriers, though, as a study of the US, UK and Chinese markets by Lloyd’s of London revealed. One problem is the lack of clarity on how to share the risks, it said. The Working Group on the Sharing Economy, a unit set up by the Canadian province of Quebec, has made several recommendations to break down barriers and make market entry smooth.
Major insurers such as Allianz and Zurich have launched dedicated units to explore the business potential. Before last summer’s travel season, Allianz noticed an interesting development in the US market: it said the intention to use sharing-economy services was declining in favor of more traditional services.
That was just a small blip in an otherwise robust market, with the scope for growth remaining strong. So insurers including Allianz are moving ahead with substantial investment in the sector, embracing the digital future whole-heartedly.
In 2016, French insurer AXA’s CEO Thomas Buberl summed up the challenges by telling the Financial Times, “Today our competition is Allianz and Generali, but tomorrow it could be Google and Facebook.” AXA has since forged partnerships with a number of companies including Grab, BlaBlaCar, MyTwinPlace and Friendsurance.
Talking of innovation, some companies are already making headlines with custom-made products.
Marsh, a leading global insurance brokerage, has just unveiled a cloud-based platform called Bluestream for the affinity market, addressing the needs of the sharing economy. Some of Bluestream’s features are based on blockchain technology and artificial intelligence.
How does it work? The company says Bluestream helps customers choose and scale the insurance solution that best meets their needs.
Whereas most forms of insurance provide coverage for tangible assets, insurers are increasingly faced with the challenge of protecting customers’ intangible assets. The solution lies in innovation and collaboration, and some insurers are already reaping the benefits of investments in such projects.
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