This article is part of our special report How will big data change insurance?.
The success of sharing economy firms offers new opportunities to insurers who see Uber drivers and Airbnb flat owners as a potential source of revenue. But setting up a safe environment for digital platforms, contractors, and users remains a challenge.
In June, the EU finally started to tackle the legal hurdles and political challenges raised by the rise of sharing economy firms.
With Uber, Airbnb, and Blablacar, citizens are turning into both consumers and producers of a service, which raises questions about their legal status, rights and obligations.
In a set of guidelines published on 1 June, the European Commission acknowledged that the collaborative economy “often raises issues with regard to the application of existing legal frameworks”.
“There is a risk that regulatory grey zones are exploited to circumvent rules designed to preserve the public interest,” in particular in the field of labour relations and consumer protection of taxation, the executive warned, echoing concerns raised by taxi drivers and consumer organisations.
Not all the same
Guilllermo Beltrá, Head of Legal and Economic Department at BEUC, the European Consumers organisation, said the the Commission “rightly” identified the challenges. In his view, the key question is to determine when a consumer becomes a trader, and what is the responsibility of intermediary platforms.
The executive’s communication made a difference between digital platforms whose activity is mainly “technical, automatic and passive” and those ―like Uber and Airbnb― which offer not only hosting services but also rating facilities, payment facilities, insurance or ID verification, which constitute the “underlying service”.
In such cases, the executive said that the liability of digital platforms should be bigger. Companies should be excluded from liability only when they act as hosting services, it said.
When it comes to making the distinction between sporadic contractors and regular service providers, the European Commission recommended setting thresholds under which the economic activity would be considered as a non-professional peer-to-peer activity. An Uber driver who does one or two weekends per month should not be seen in the same way as someone who works five days a week, for example.
The Commission called on member states not to impose “disproportionate” administrative burdens on Uber drivers or apartment owners who provide services only on an occasional basis.
But the EU could find itself lacking the right legal tools to protect the ‘prosumers’. The half a dozen directives on consumer protection only apply to company-to-consumer relations, not peer-to-peer relations.
Insuring new relations
In order to bolster a “safe environment”, Beltrá said that insurance contracts to protect both users and the contractors could be a way forward.
This is where sharing economy startups are partnering with traditional insurers. Axa recently signed an agreement with Blablacar. Zurich reached an agreement with Uber to extend drivers’ insurances (excess contingency liability) in the Asia-Pacific region. Meanwhile, Airbnb offers a host guarantee programme on top of homeowners and renters insurance.
“Certainly, we see sharing economy as a market with a lot of potential that is moving forward,” explained Karl Gray, Global Head of Casualty at Zurich.
Around 72% of insurance executives around the globe are planning, or have already established, new distribution partnerships to embrace the opportunities of the sharing economy.
These new digital ecosystems “will force insurers to re-examine how they conduct their businesses in the new sharing economy”, wrote Michael Lyman, Senior Managing Director of Accenture Insurance, in a blog post earlier this year.
Insurance liability moving from people to devices
Against the backdrop of a fast-changing digital ecosystem, insurers are developing new models to understand the underlying risks, while preparing new products to better adapt to them.
Hence, the focus of insurance liability is shifting from people to devices. Meanwhile, “smart insurance solutions, that incorporate mobile and connected devices, are driving down premiums while new risk protection and mitigation services are creating new sources of revenue,” Lyman noted.
Beltrá believes it is “too soon to tell” whether these insurance-based approaches to create a safe environment would be enough, or whether new legislative provisions would be needed at national or European level.
“We do not have enough data yet,” he explained.
The Commission said in its communication that it will monitor the evolution of this nascent sector, collect statistical data and evidence and support the exchange of best practices. The institution did not rule out to come up with new legislative proposals if regulatory gaps remain.
Gross revenue in the EU from collaborative platforms and providers was estimated to be €28 billion in 2015. Revenues in the EU in five key sectors almost doubled compared with the previous year and are set to continue expanding robustly.
Growth has been strong since 2013 and accelerated in 2015 as large platforms invested significantly in expanding their European operations. Going forward, some experts estimate that the collaborative economy could add €160-572 billion to the EU economy, says the European Commission.
A Eurobarometer opinion poll found that 52% of EU citizens are aware of the services offered by the collaborative economy and 17 % have used such services at least once.
- European Commission: Sharing economy proposal
- European Parliament: Report on the Digital Single Market (including the collaborative economy).
- Dutch Presidency of the EU: Harnessing the potential of the collaborative economy
- Spanish regulator (CNMC): Study on the sharing economy.
- Bruegel think-tank: the economic impact of the collaborative economy.