The “sharing economy” (code for disruptive services such as Airbnb and Uber) is catching on with high consumer acceptance. Governments are setting a stage which will allow consumers easy access to these new services. Insurance will play a key role as well. Our question is: Will we be wearing a white hat or black hat?
The Ontario sharing economy script
In May, the Ontario Chamber of Commerce, in partnership with PwC, convened a forum of interested parties to discuss “how to approach the regulatory challenges of the sharing economy.” One result was a report, Harnessing the Power of the Sharing Economy: Next Steps for Ontario.
While the Ontario government is identified as the lead actor, the insurance industry is scripted to play a supporting role. Unfortunately, we seem to be currently wearing a bad guy’s costume at the minute.
The report notes that “sharing economy companies and peer-to-peer networks have the potential to become a significant segment of Ontario’s future economic activity, stimulating new consumption, raising productivity, catalyzing entrepreneurship, and generating new tax revenue.”
There are challenges that need to be addressed. The report says “sharing economy business models raise concerns about user safety, privacy, and access.” This, the report points out, could be dealt with by the government on the same basis as it treats other e-commerce activities.
However, the report notes that insurance products – important components of consumer protection – have lagged behind: “Traditional insurance products have not adapted to account for occasional commercial use (throughout the sharing economy) and the need for products that provide this coverage.”
Are we destined to play Dr. No in perpetuity?
The most public challenge is the insurance covereage for automotive ride sharing services, such as Uber. There has been a flurry of articles highlighting the gap between the existing personal insurance policy and the exposures facing Uber drivers and passengers.
Insurers are reported to be carefully examining policies and taking negative action when it finds a driver misusing the personal automobile policy. Insurance Business Canada quotes an unnamed spokesperson from Allstate saying that such drivers are “unlikely to have the right insurance because this is a grey area in terms of regulations”.
Of course, because of governmental regulations, insurance companies cannot change automobile policies unilaterally. However, the PwC report argues that this should not be an escape clause for insurers.
Is there a way forward?
In March 2015, the US National Association of Insurance Commissioners (NAIC) published principles for Transport Network Companies (TNC) insurance policies. TNC is the generic classification for ride-sharing services such as Uber.
Simultaneously, the NAIC published a Transportation Network Company (TNC) Insurance Compromise Model Bill, created by Uber and selected US insurers, to be used by US state legislators and regulators in considering new legislation and regulations to bridge the gaps.
Lloyds recently commented on the significance of this:
While the compromise model bill is not law in any state, it represents a significant achievement between TNCs and insurers, … TNC bills are currently pending in several states, and it will soon be rare for a state not to have enacted a law on the insurance requirements of TNCs.
And some insurers are on the road …
Some insurers are taking unilateral action. In California, MetroMile (we blogged on this innovative company a few years back) has worked with the state regulator to receive approval to provide a ‘rideshare endorsement.’ According to the Metromile blog, this endorsement “extends coverage for a personal auto insurance policy to recognize TNC use.”
On our home turf, Intact Insurance issued a press release in September that it has “entered into a cooperative agreement to develop tailored insurance products with the popular ridesharing service Uber.”
Where do we want to be?
Like it or not, the “sharing economy” has caught the consumer wave. Pushing too hard against this carries high risk of further consumer disengagement. I’d like think we could find a way to bring insurance to the new risks.
Great article (as usual). I think the model regulation is great but general understanding on the behalf of the consumer is the bigger issue.
Great Point, Lloyd. There is a fair bit of caveat emptor with the offerings at this point. – Patrick