March 7, 2017 |

How The Sharing Economy Is Changing Insurance

The sharing economy is not slowing down. According to PricewaterhouseCoopers (PwC), the European sharing economy generated nearly €4 billion in platform revenue and €28 billion in transactions in 2015, compared to just €1.8 billion in platform revenue and €16 billion in transactions in 2014.

However, unforeseen and complicated incidents between sharing platform users can hinder growth and even sink new startups. That’s why sharing economy entrepreneurs are obsessed with one word: trust.

Users need to feel that their assets are protected when they engage in a transaction – whether they use a sharing service to lend out their lawnmower or drive someone in their car. Traditional insurance giants haven’t yet figured out how to cover the wide variety of peer-to-peer transactions that now take place.

Insurance and the sharing economy have a complex and often messy relationship. For example, the State of California has created a legal timeline that breaks up Uber rides into three distinct stages of insurance.

Who’s Changing the Game?

A new industry of startups, often dubbed “insurtech”, has emerged in response to the demand for streamlined, pay-per-use insurance. Insurtech entrepreneurs provide highly customizable insurance that fills the gaps in coverage left by traditional insurance providers.

Insurtech startups like Guardhog offer end users underwritten insurance packages for all sorts of sharing transactions.

New Partnerships

Don’t count out traditional insurance giants just yet.  Due to their relative size and age, insurtech startups often lack the capital and experience to navigate the insurance industry’s web of regulations. Consequently, traditional insurance companies will acquire or partner with insurtech startups – like the insurtech startup SafeShare Insurance, which has its policies underwritten by Lloyd’s of London.  

By 2025, PwC predicts that the European sharing economy will reach €570 billion in transactions and €83 billion in platform revenue. The demand for accessible and customizable insurance will continue to grow, and insurtech entrepreneurs must adapt their models to provide coverage for new kinds of sharing services. 

Check out our conversation with Guardhog, an Insurtech startup offering bespoke insurance for a wide range of sharing economy transactions.