Lloyd’s study underscores the need to think beyond traditional insurance coverages

By: Lloyd’s

Lloyd’s study underscores the need to think beyond traditional insurance coverages when creating solutions for the sharing economy

Findings show potential for double digit increases in the percentage of the population willing to share services or assets globally. Addressing current insurance gaps with innovative solutions that reduce risks and improve experience for all parties is crucial to realising growth potential.

With nearly 680 million people using assets or services purchased through sharing economy platforms globally, new research from Lloyd’s the specialist Insurance market and Deloitte analyses how insurance can support growth against key risks in this booming sector. The study focuses on the peer-to-peer model and specifically the services, real estate and finance sectors.

Squaring risk in the sharing age: How the collaborative economy is reshaping insurance products calls attention to the role of the insurance industry in supporting shared platforms through all stages of maturity.

Focusing on six key markets Germany, France, UAE, UK, US and China), the study reveals that more than a quarter of the population has either bought services or rented possessions from their peers via shared platforms in the past three years. However, the penetration rates differ considerably by country yielding notable geographic insights.

Trends in Europe and the Middle East

  • Among western economies, France shows the highest adoption rate for sharing. Between 2015-18, 12 million people (22%) shared assets and 17 million consumed them (33%). With a vibrant property sharing scene which is very popular with international tourists, France is home to multiple sharing economy pioneers in lift-sharing and shared dining.
  • Germany – Despite having a highly innovative market with leading technology and sharing economy start-ups in Berlin, shows the lowest overall participation in the sharing economy among western economies after the UK. Between 2015-18, Germany had more than 12 million providers (19%) and 19 million consumers (29%) of shared assets and services, however amongst other factors, a strict and complex regulatory environment is presenting the biggest challenge for growth.
  • Interestingly, the UAE displays the second highest penetration rates globally for sharing second only to China. In the 2015-18 period, more than 4 million people (54%) shared assets on online platforms and 5 million (61%) consumed them. The UAE market has attracted global sharing economy giants and managed to nurture several local players and a growing freelancing service offering.

Speaking on the findings Lloyd’s Head of Innovation Trevor Maynard said:

“Sharing economy platforms have transformed entire industries because they’ve rejected the status quo and challenged the way we think about once traditional goods and services. In order to effectively serve the sharing economy, we as insurers must follow that example and rethink traditional insurance products.”

The report highlights that transacting in the sharing economy is not without risk and adequate protection for all parties means insurers must continue working to adapt traditional coverages to fit the unique needs of this sector, whether it’s solutions provided by platforms via transaction-embedded cover, or a product purchased independently by sharing economy participants. A range of insurance products currently offered cover potential risks such as losing a possession, facing liability or suffering damage among others. Despite these risks, the positive experiences and benefits provided by the sharing economy, mean that it continues to grow and diversify. The opportunity for sharing economy platforms and the insurance industry to work together is clear.

Nigel Walsh, partner in Deloitte Digital said: “In our market scanning, we’re not only seeing an increasing number of sharing economy platforms provide insurance to their users, including bespoke products through the Lloyd’s market, but also a large number of start-ups helping to solve the insurance gap for all participants in the sharing economy. Equally, insurers are still in the very early stages of developing dynamic and flexible solutions this sectors needs as it continues to evolve at pace. The opportunity for sharing economy companies and insurers to partner to reduce risk in this space has real implications and exciting opportunities for future growth.”

The report commissioned by Lloyd’s is based on interviews with 8,527 consumers from France, Germany, the UAE, UK, the US and China, as well as with more than 20 subject matter experts and two workshops with representatives from sharing economy platforms, innovation experts and insurance practitioners.