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Insuring the Digital Economy (Part 1): New Modes, New Methods

Insurers are realizing that the new digital economy is a prospect for growth (beyond cyber insurance). But insurers are also finding that they have to take different approaches to be successful in this world — and it involves making the insurance meet new demands.

We’ll look at two examples. In this post (part 1 of 2), we will look at insuring a new service in Canada.

Rent out your ride …

Take Turo, a car-sharing service which helps car owners rent their vehicles to other drivers. The construct is simple: you list your car on the Turo Website for potential users to evaluate. When your car is selected, and you confirm the arrangement, you have to take two steps:

  • “Coordinate where and when you’ll meet your guest. Check their license, walk around the car, check the fuel and mileage, and send them off on their adventure.”
  • “Kick back and earn. Rest easy, Turo, Intact and belairdirect cover your car with $2 million in liability insurance and 24/7 roadside assistance throughout the trip, so you can just watch the money roll in.” (emphasis added)

Insurance coverage is ‘baked in.’ Intact Financial Corporation (IFC), through two of its companies, provides a commercial policy for the vehicle while rented in the provinces in which Turo currently operates (Alberta, Ontario and Quebec).

What’s new about this?

This is similar to auto rental firms, with one important exception. You, the car owner, are obliged to take the car to a site where the renter will pick it up. The journey to and from the client is considered a business activity, which may not be covered by a personal lines policy — unless, of course, you have your car insured with Intact or belairdirect. When you decide to put your ride on the web for hire, there is a prompt to contact your agent or broker. If you are insured by an IFC company, it’s a simple endorsement.

I can be a fast follower, right?

In a recent conversation, Karim Hirji, SVP – International & Ventures at Intact, told us that this is a unique feature which provides seamless service for the car owner, the platform provider, (Turo) and the renter. It also allows Intact and belairdirect customers to immediately list the vehicles on the Turo site.

Of course, other insurers could supply the same endorsement and work around the listing issues. However, there is a critical piece missing. As there is little experience with this approach, IFC is working directly with Turo to aggregate data and improve accuracy in rate development.

And, there is good reason to pursue this. Harji notes that over the next 20 years, 16% of cars on the road could be involved in auto-sharing.

And data are the royalties, right?

Yes. Perhaps.

But what happens when data aren’t neatly stored in rows and columns? That will be the subject of our next post on this topic.

Meanwhile, we have a question for you. Are you seeing opportunities in the new economy? If so, are you finding yourself forced to get creative in making this work?


Read More

Read the second part of this post: “Insuring the Digital Economy (Part 2): A Slice of On-Demand Insurance.”