Why sharing economies come with new risks

16 September 2016

As people change their lifestyles in response to new technologies, are they thinking about the risks?

The (re)insurance industry, Silicon Valley and similar hubs are moving closer together. New technologies, big data and disruptive companies are starting to interplay more with how risks are assessed and insurance products are packaged.

If you haven’t noticed this already, be worried. This trend will only increase as industries change and emerge ever more quickly – creating a host of new or increased liabilities and insurance needs.

Consider the so-called ‘sharing economy’. Collaborative consumption, driven by person-to-person businesses – as typified by companies such as Uber and Airbnb – allows, in many ways, for greater ease and access to goods and services.

Who’s liable?

The sharing economy also creates new, sometimes unintuitive, risks that can take a long time to identify, let alone manage.

Even when the risks are identified, it’s often unclear/highly debatable what parties should be bearing what proportion of the risk. Naturally, the provision of insurance products for these new or emergent risks lags further behind.

Yet such ambiguities in risk and liability – which are a natural accompaniment of emergent technology, good and services – are source of opportunity for (re)insurers.

The insurance industry can play a proactive role in plugging liability gaps, and providing holistic advice on how companies can map out their fuller range of risks, and ensure these risks are spread commensurately throughout the value chain.

Data capture

Health and life insurance are two of the areas likely to be most quickly influenced by new technology and disruptive companies.

As we know, a key driver and outcome of new technologies is big data: data feeds into the services and products, and is also produced by them. The aggregation of third-party data will obviously create many data protection challenges for the companies involved.

For example, already some wearable devices can detect physical information about the wearer, such as levels of perspiration, blood sugar levels, which raises questions about how that third-party data is captured, stored and shared.

Such information, however, could also help to bring insurers and end customers closer together. For instance, it could help to reverse the decline in take-up of life insurance – which has been in fairly steady decline for the last 50 years, largely because some people are put off by the assessment process, which they consider lengthy and intrusive.

Big data, if appropriately managed, could help people to buy more easily, without human contact and the hassle phone calls.

The full extent and nature of interplay between technology, big data and the (re)insurance industry is still unclear. But by the time it becomes clear, the boat will have set sail – so act now.

For more information, please contact Gregg Holtmeier, Head of Western Region in North America on +1 415-930-9077 or email gregg.holtmeier@jltre.com