Research from Lloyd’s and Deloitte has tackled the huge growth of the sharing economy and discussed how insurance can adapt to support growth and opportunity in this booming sector.
The study, titled ‘Squaring risk in the sharing age - How the collaborative economy is reshaping insurance products’, looked at six key global markets, namely China, Germany, France, the UK, the United Arab Emirates (UAE), and the US. It revealed that over one-fourth of consumers in these markets have bought services or rented possessions using shared platforms within the past three years.
Around 500 million people share assets or services across these markets; and close to 680 million people make use of them. However, penetration rates vary widely between countries.
According to the study, China has the largest shared economy among the six markets. Close to three in every four (73%) of the online population are consumers, while over half (55%) supply goods and services. These are more than double the figures for the US and UK markets.
Both China and the UAE have a proportionally larger shared economy than the US, which is considered the birthplace of the sharing economy.
Meanwhile, the UK has the lowest participation in the shared economy, for both supply and demand sides. Less than a tenth (9%) of the population has participated in the past three years, 10 percentage points lower than fellow European market Germany.
“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,” said Trevor Maynard, head of innovation at Lloyd’s. “In order to effectively serve the sharing economy, we as insurers must follow that example and rethink traditional insurance products.”
The report highlights that the sharing economy is exposed to several risks, and that insurers must adapt its traditional coverages to fit the unique needs of this new and growing sector. Some examples provided were solutions provided by platforms via transaction-embedded cover, or a product purchased independently by sharing economy participants.
“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,” said Nigel Walsh, partner at Deloitte Digital. “Equally, insurers are still in the very early stages of developing the 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.”