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Fast Fast Forward

Sharing ideas on the sharing economy


Sharing Means Profit…But Not Without Risk

Results of this disruptive innovation have been extraordinary. Total revenues for the five most prominent sharing economy sectors – P2P finance, online staffing, P2P accommodation, car sharing and music/video streaming – are expected to be approximately £9 billion in the UK alone by 2025, up from just £500 million today, according to PwC. While this innovative economy has high growth expectations, there is also the emergence of new risks that need to be addressed to ensure a sustainable future for all participants.

Operating exclusively online, the sharing economy can take advantage of a global audience and attract users on a worldwide basis or simply target a specific region.

A growing dependency on the internet and smart phones has increased exposure to sharing businesses such as Airbnb’s accommodation website, Uber’s car service, Spotify’s music sharing platform, and’s cleaning services. The effects of this technology are having a significant impact in other business sectors ranging from food to fitness, media, entertainment and fashion.

In 2014, the UK government asked Debbie Wosskow, the CEO of Love Home Swap, the world’s largest home exchange club, to lead an independent review in order to make recommendations on how the UK can continue to play an active role in fostering the development of this sector. In the report titled “Unlocking the sharing economy”, Ms. Wosskow acknowledged that a degree of caution is required in the face of such disruptive technology but insisted that the potential benefits associated with sharing opportunities were tremendous and a collaborative approach from all stakeholders is required to ensure the sharing economy prospers.

Trusting a Shared Economy

One of the key challenges for the sharing economy is its dependency on trust between the two parties. Often the consumer must exercise a level of blind faith when exchanging goods or services from a vendor through the digital platform. For example, a flat might be rented out by its owner over a P2P accommodation platform to an individual who ends up hosting a party with guests causing material damage much above what can be covered with the required security deposit.

On the other side, the recipient always encounters the risk that the item, service or product shared is below the original advertized standard. Frequent occurrences of such incidences will discourage people from participating in the sharing economy, as questions arise over who will cover the costs if anything similar might happen to them. Additional concerns around privacy issues, dispute resolution, fake reviews and wider regulations combine to undermine the legitimacy of this new marketplace.

These digital marketplaces, which provide the platform for participants to find each other to purchase and/or share products or services, have historically opted not to take on additional responsibility related to damage or unfortunate outcomes and accordingly provide little or no protection for their users. So far, businesses have found it difficult to offer cover to their users as there may be no direct insurable interest in the item, product or service that is being shared.

Protecting the Value and Integrity of the Sharing Economy – the Insurance Industry Response

Establishing a framework that supports and promotes trust within the sharing economy is a priority, especially in a market where users are either uninsured or underinsured.

Due to the rapidly growing number of businesses involved in this economy and the accompanying rise in data availability, the British Insurance Brokers’ Association (BIBA) recently published a guide expressing urgency for the insurance industry to address the associated risks in an innovative and cost efficient matter.

We see this as a priority and are currently working on solutions to address risks for both the seller and the recipient – including the dynamics of sharing with strangers, sub-standard quality, damage, lost or stolen property and possible legal action. Furthermore, businesses that adopt measures to mitigate potential user concerns will not only ensure their own success but also gain a competitive advantage over peers who operate without any assurance.

Building awareness and engaging with market participants in this exciting new space is part of our strategy to help clients address the risks that are emerging from a rapidly changing world. With the right  solutions, the insurance industry will be able to promote confidence in the sharing economy and provide increased credibility for businesses and marketplaces that incorporate these products – unlocking underutilized assets and creating a more flexible, fair and sustainable sharing economy. 

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AXA XL is the P&C and specialty risk division of AXA.