Sharing Economy: Insurance Briefing – Ninety Consulting
Article Synopsis :
Is the sharing economy a growth opportunity for insurers or a threat to existing revenue streams?
In “The Sharing Economy: An Insurance Briefing”, Ninety Consulting provides a short overview of developments to date, and evaluates the latest emerging trends offering insights on how the sharing economy will likely impact the services insurers provide, identifying a series of potential growth areas for insurers as the sharing economy develops.
The sharing economy, this paper asserts, is not all about economics. Other factors include:
- Universal access to technology
- Ease of use and convenience compared to alternatives
- Companies (especially SMEs) needing a more flexible, adaptable, on-demand business model
- Environmental concerns and the opportunity for reuse of finite resources toward optimal utilization
- A desire to escape the narrow, formulaic choices provided by big brands and satisfy a personal need for experiencing something different. In a sense, participating can offer a bit of adventure – staying in someone’s house, using someone’s car, etc
- Supporting a grassroots movement of small, entrepreneurial traders which reconnects with local people and satisfies a desire for community
- 65% of people who participate in the sharing economy are women – as such, it represents an opportunity for women to redefine the future of work
Key underlying trends and the hidden opportunities for insurers are summarised as follows:
Trend #1: Culture and market shift towards access rather than owning
- Opportunity: Creating blended/hybrid policies such as standard insurance plus extensions for shared economy services provision/use or both
Trend #2: Sharing economy platforms provide secondary insurance, but could move to primary
- Opportunity: Providing insurance solutions for specific platforms
Trend #3: Other insurance offerings are emerging specific to the shared economy
- Opportunity: Obtaining access to the platform client base – both providers and customers of the service, extending geographic and segment reach
Trend #4: Services are being used by certain demographic groups which make targeting and risk profiling easier
- Opportunity: Sharing broad risk data for focused groups in order to insure risks for a platform
Trend #5: Regulation is being adjusted and is increasing
- Opportunity : Insurers create more control of data by working with platforms offering further checks, such as claim history, driver telematics, etc.
Trend #6: Big businesses are acquiring platforms as they see access-not-owning as part of their business models
- Opportunity: Investing in emerging platforms for financial return and/or a future link with a major brand
Trend #7: Sharing economy platforms are acquiring competitors for geographical expansion and/or advanced tech capability
- Opportunity: Sharing technology and embedding risk algorithms into the platforms from partnerships or as an investor
Trend #8: Associations and standards are forming
- Opportunity: Helping create standards and networks which will enhance brand reputation, affect policy and build relationships
Trend #9: Trust systems are developing
- Opportunity: Working with platforms on data matching in order to increase trust and decrease unsafe activities
Ultimately, the paper suggests, insurers should identify the trends and opportunities relevant to their unique situation and build strategic plans accordingly, on a fast track.
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Digital Insurer's CommentsThe sharing economy is serious business. PwC estimates the industry will grow from $15 billion in 2013 to $335 billion by 2025. Pew Research estimates that 72% of American adults have used at least one of 11 different shared and on-demand services, with 20% using four or more, and 7% six or more. Uber, Airbnb, and Lyft have become household names; upstarts like JustPark, Hassle, WeWork and Vrumi aren’t far behind.
The implications for insurers are, of course, massive. Asset ownership, a longstanding tenet of insurance, is being redefined – in the open market if not yet the courts. There is an opportunity here for digital insurers to not only grow new revenue in the shared-asset space, but harvest new sources of data around the platforms orchestrating the sharing itself.
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