Government wants to facilitate discussion between ‘challenger businesses’ and insurers
Leading members of the insurance industry are meeting representatives of the sharing economy at 10 Downing Street next month as the government tries to remove hurdles from the path of companies with new business models.
The Department for Business, Innovation and Skills has said the sharing economy will play an important role in supporting economic growth and improving consumer choice.
But sharing businesses – which include car pooling, house sharing and peer-to-peer lending clubs – have said that access to insurance is one of the main barriers to the companies taking off.
According to the State of the Sharing Economy Report, 65% of adults in the UK participate in the sharing economy.
“We’re in the midst of a seismic culture shift. People are choosing to access goods and services rather than owning them,” says Benita Matofska, founder of Compare and Share, an online comparison site for the world’s 7,400 sharing economy websites.
Matofska cited research that every adult in the UK has £3,500 of unused items at home, while 83% said they would share idle assets if it were easy.
“In a sharing economy you get all the things you need, at a price you can afford, but you don’t have to pay for things you don’t use like cars in driveways for 23 hours a day or clothes in cupboards,” she said.
The meeting on 7 July will be chaired by Bluefin executive chairman Stuart Reid with industry representatives including Towergate chief underwriting officer Paul Jewell and AXA underwriting managing director David Williams.
Reid said: “One of the challenges for these companies is access to insurance services that other businesses take for granted.
“Sharing companies themselves find it hard to understand what they need cover for and how to access it. Sadly that’s the case with brokers and insurers too.
The key challenge that insurers face when covering a business based on shared principles is an inability to clearly define the risk, Reid added.
“If you insure a house, you normally insure the person and the asset. What the sharing society means is you’re just insuring the person. In principle that doesn’t sound like too much of a problem, but [the insured] could essentially rent a $10m apartment in New York and burn it down. So how does an insurer work out a premium for that? It’s very, very difficult,” he said.
Jewell said: “Most of industry insures the physical assets or the individual. It’s not used to where somebody’s borrowing or using somebody else’s assets.
The meeting was organised after a Treasury-backed round table in January pinpointed insurance as one of the main barriers to faster growth.
The Treasury has included the sharing economy in its Challenger Businesses Programme, which it defines as “ground-breaking, dynamic businesses with new technologies, innovative products and vigorous business models”.
BIS has said it wants to help businesses in the sharing economy to enter and grow in their target markets.
“Startups couldn’t find anybody in the industry that was willing to cover them,” said Chas Ball, chief executive of CarPlus Trust, a not-for-profit organisation which represents car sharing clubs and businesses.
“We were worried we’d have a closed shop where only those going for several years would be able to develop and those that hadn’t wouldn’t have a chance.”