Emerging Coverage Issues Driven by the Sharing Economy


The second session of the Education Day was entitled “Emerging Coverage Issues Driven by the Sharing Economy”.  Marcus Doran, COO of Armour Risk and Education Day Co–Host, moderated the panel consisting of: Gerry Finley, Senior VP of Casualty Underwriting at Munich Re; Joseph LoParrino, Manager of US P&C Actuarial Services-PwC; and Amy Kallal, Partner with the law firm of Mound Cotton Wollan and Greengrass LLP.


The hour long session was very detailed and the 60 slides shown may be reviewed on the AIRROC website. Home sharing (Airbnb) and ride sharing (UBER) were the main types of sharing discussed, followed by emerging opportunities, including “blockchain” and peer-to-peer insurance.  


Joe LoParrino discussed the current landscape, noting that technological advances and resource scarcity were at the heart of the sharing economy. $15 billion had been invested in the sharing economy as of 2013; however, only 19% of the total U.S. population had engaged in a sharing economy transaction. Almost everyone in the audience had used UBER, while only a few people had been involved with home sharing.


Gerry Finley then discussed underwriting considerations. He noted that the transportation network company (TNC) connecting the buyer and seller resists assuming any liability. Furthermore, traditional policies do not insure, or specifically exclude or limit coverage for, certain exposures that may arise from the sharing activity. In addition, legislative and court battles lie ahead.


Insurers have been somewhat responsive to the coverage gaps that sharing activities have created.  Graduated coverage is available for UBER drivers based on the stage of the ride share process. Liability exposure for ride sharing depends on three scenarios: where the driver is logged in but not yet matched with a passenger; where the driver is in route to pick up a match and; where the passenger is in the vehicle. While ride sharing exposures are generally covered in the basic commercial auto policy, most drivers rely on their personal auto policy where gaps in coverage currently exist.  For its part, UBER offers liability coverage up to $1 million per incident and physical damage coverage to the driver’s vehicle that occurs during a trip up to $50,000.


Meanwhile, the traditional homeowner ISO policy form (HO3) currently excludes business use and only covers “occasional” rental. The two major risks in the home sharing Airbnb context for short-term rentals are property damage or theft to the host’s property and potential bodily injury to guests. Airbnb offers both types of coverages as of January 2015.


Amy Kallal discussed the legal landscape regarding whether drivers are independent contractors instead of UBER employees in detail. A California court in O’Conner v. Uber (see slide) held that the drivers were presumptive employees because they perform services for the benefit of UBER. This case apparently settled; however, various states have made their own determination of employment status.


The panel ended with a brief discussion on the emergence of blockchain and peer-to-peer insurance. Blockchain involves a shared digital ledger that constantly grows as new blocks are added to it. The decentralized ledger keeps a record of each transaction that occurs across a network, with the blockchain’s integrity hinging on strong cryptography. Banks, investment firms and insurers are investing considerable time and resources to develop the technology, which started with Bitcoin. Numerous insurance issues arise with blockchain, including security, regulation, fraud and terrorism. Peer-to-peer insurance is not a new concept. However, new technology is lowering the barriers to entry for the average person.  Lemonade recently launched its peer-to-peer platform that provides limited coverages in limited jurisdictions.  While it is in its infancy, it will be interesting to watch it address issues such as multistate regulation and longer tailed exposures.  Who knows, maybe a run-off opportunity!