“As insurance professionals, we have to stay ahead in what’s happening in the lives of our clients. This [the sharing economy] is a great example of that,” mentioned Stacey Warren, chief gross sales and customer support expertise officer at Vault, throughout a 2022 PRMA Summit panel dialogue on ‘The Sharing Economy Risks Exposed’.
The Private Risk Management Association (PRMA) is a nonprofit that brings collectively insurance coverage trade leaders within the excessive net-worth (HNW) personal threat and insurance coverage administration area of interest. According to the PRMA Outlook Survey 2022, a 3rd of the group’s members mentioned they’re seeing purchasers extra concerned within the sharing economic system this yr.
“You can’t assume that just because your client is a HNW client, they’re not renting out their pool or renting out their driveway,” mentioned Warren. “Because it is so accessible and really easy for households to do that, individuals are doing it – it is form of the cool factor. But it is creating some very distinctive exposures for us. How can we be certain that our clients are coated?
“Are we equipped as agents? Are we asking the right questions? How do we make sure that if our client puts their home on Airbnb mid-term, or rents out their pool mid-term that we’re ensuring they have proper coverage? There’s a whole set of unique challenges that come with this topic. Are we equipped as carriers? Can we provide [agents] the solutions that they need to cover their clients? I don’t think the answer is yes.”
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Peter Piotrowski, chief claims officer at Vault, has seen varied sharing economic system claims from HNW purchasers, the place the exposures have been largely unconsidered.
“When I think about someone renting out their pool in their backyard, that doesn’t seem so bad; the pools are probably well maintained, and there’s equipment out there,” he mentioned. “But then I feel: Is this a business publicity now, or is that this a private strains publicity? When you go to a public pool or a paid-for pool, there are diving instructions, there are indicators of the place you possibly can soar, how deep the pool is, and there are life saving units. [Almost] none of that exists in a [private] pool setting.
“I’ve also seen Airbnbs being rented to one or two individuals, but all of a sudden there’s a party there. There was a drive-by shooting at one Airbnb rental in a very lovely neighborhood. Turned out it was rented to a really nefarious figure who had a wild social media presence, posted that he was at the event, attracted some of his adversaries, and they shot up the house. That was an exposure that was never really anticipated.”
In most householders’ insurance coverage insurance policies, there are limitations utilized to business actions. One problem with sharing economic system exposures – equivalent to renting out a pool or a driveway – is the grey space between incidental enterprise (which could be coated below a owners’ coverage) and true business dangers (which require separate business insurance coverage).
The PRMA panel mentioned how important it’s for insurance coverage brokers to quiz their purchasers accordingly to establish whether or not they’re involving in any sharing economic system actions, how usually they’re participating in such exercise, and the way a lot revenue they’re deriving from it. This data will be certain that they’re adequately coated for his or her distinctive sharing economic system exposures.
“Throw that underwriter hat on and think about: if you were presented this risk, how would you find a solution for it?” mentioned Amanda Martinez, premier advertising and marketing supervisor at Hylant. “Things like discovering the precise itemizing [on Airbnb, for example] and sending that to an underwriter is useful. And search for data from the itemizing. How a lot is the weekly worth? Can you hire it for lower than every week? Those are all going to be issues as a result of there’s extra individuals coming out and in of the home.
“How do you do background checks? As a homeowner, you’re probably not thinking about that; you’re thinking about the income that you’re getting, so you can pay off your taxes or whatever it may be. With the income, how much are you making? Does that cause issues with incidental business? We [as agents and underwriters] want to make sure that we understand some of those things.”
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The panel – which additionally included Mary Robinson, private strains gross sales and advertising and marketing with Cincinnati Insurance, MaryAnne Chandler, nationwide threat placement advisor with G2, and Roper DeGarmo, founding father of Signature Personal Insurance – agreed that robust collaboration between insureds, brokers, and underwriters is important within the fast-evolving sharing economic system.
For instance, if a HNW home-owner is renting their property on Airbnb, an underwriter might wish to know if there’s a pool, or a ship, or any kind of auto (golf carts, for instance) that will pose further dangers to renters. Piotrowski urged that the events might work higher collectively on threat administration, presenting HNW purchasers with helpful instruments on methods to shield their properties and safe their valuables.
“We’ve seen situations where the renters may have been told by the owners: ‘Do not use this equipment,’ but their friends or other invitees [think] it doesn’t relate to them. Next thing, someone’s borrowing a golf cart [because] the keys are there, so why not? Or the keys are in the boat [so they go for a jaunt],” he mentioned.
“That turns into not only an exposure of owning this item, but you as the owner of it – do you have some additional [liability] for negligent entrustment or negligent supervision by allowing folks – could be minors, could be intoxicated individuals – access to your stuff? We haven’t really educated them well enough to keep it protected or keep it unavailable for the renters.”
While the sharing economic system is rising in recognition, many purchasers are unaware of the dangers concerned. The ‘Sharing Economy Risks Exposed’ session on the PRMA Summit regarded on the professionals and cons of the sharing economic system to assist brokers confidently educate and information HNW purchasers as they entertain sharing economic system endeavors.