Business risks of a £9bn sharing economy

The internet has transformed the way people can access products and services – and made it far easier for people to offer their goods, skills and expertise to others.

In particular, the recent emergence of websites that enable people to share everything from their driveway to their office space has led to the growth of the so-called ‘sharing economy’. In the UK, this sharing economy is worth an estimated £500 million, with this figure predicted to rise to £9 billion by 2025.

Helen Jales, Head of Strategic Propositions, Zurich, says: “The government is determined to make the UK the centre of the sharing economy and has set up a trade body to support this growth.

“This is a trend that brokers should follow closely, as there are both risks and rewards for SME customers who engage in the sharing economy.”

Accommodation and transport lead the way

Accommodation is one area where the sharing economy has already taken off.

The world’s largest accommodation provider, Airbnb, owns no property at all. Instead, it links property owners with those looking for temporary accommodation.

SMEs looking to reduce their business travel costs are turning to sharing services such as this to provide a cheaper alternative to hotels or B&Bs. Airbnb revamped its business travel offering earlier this year, and already has more than 250 companies using this part of its service. More than 50,000 UK properties are listed on Airbnb.

Other sharing sites, such as Office Genie, help SMEs find vacant office space to rent, or generate extra income by renting out unused parts of their premises.

Transport is another key part of the sharing economy, and in recent years a number of car-sharing websites have emerged, including BlaBlaCar, Zipcar and Liftshare. While SMEs are unlikely to use such sites in a business capacity, it could mean commuter savings for employees.

Emerging opportunities in the sharing economy

Other areas of the sharing economy are continuing to develop. One recent study identified 17 sharing sectors, ranging from property and transport to skills, finance, leisure, entertainment, and knowledge and learning.

The sharing economy is opening up real opportunities for SMEs that choose to embrace it.

There is a definite opportunity for the insurance industry to show it can adapt,”

Helen Jales, Head of Strategic Propositions, Zurich

The potential for significant cost savings is one area of opportunity. As well as using accommodation-sharing websites to cut costs on business trips, SMEs can also save money by finding cheap office space, including through the government’s Space for Growth programme, which allows organisations to rent vacant government property.

The sharing economy can also help SMEs become more efficient – for example by widening the pool of freelancers available for projects at short notice, through sites such as PeoplePerHour.

Brokers’ SME customers may already be engaged in the sharing economy, but they should be aware that as well as the benefits this brings, there are new risk and insurance implications to be aware of.

New trends mean new risks

The example of an SME booking accommodation for a business trip shows how risk and insurance implications could emerge in the sharing economy.

If a hotel guest tripped down the stairs and was injured, the hotel’s public liability insurance could cover its liabilities, such as compensation due to the guest, or hospital fees.

However, the insurance implications could be very different if a similar accident happened to an SME employee staying in somebody’s home, following a booking on an accommodation-sharing site.

What is the sharing economy?

The sharing economy is a broad term used to describe the economic model in which people share goods and services, often using peer-to-peer sharing websites. Practical examples would include people renting out underused assets – such as their holiday home or driveway.

Airbnb, for example, offers host protection insurance, to cover some of the liabilities a host might face if a guest was injured, however this is currently only available in the USA, and does not cover the full range of risks, such as lost earnings should the employee be unable to work.

SMEs should also consider the potential insurance implications of an employee causing accidental damage to a homeowner’s property. If the damage was not covered under the homeowner’s insurance policy, their only recourse might be to make a claim against the SME or the employee.

Even if what is being shared is intangible, such as expertise or advice, there can be risks.

Helen says: “Brokers should consider scenarios such as receiving inaccurate training on a piece of machinery through a sharing economy website, and whether there is appropriate insurance for their customers in place for this.”

What can brokers do?

The sudden, rapid growth of the sharing economy brings potential risks that SMEs may not have fully considered – making the role of insurers and brokers crucial.

The British Insurance Brokers’ Association (BIBA) has produced a guide to the sharing economy, which Zurich has contributed to. In the guide, BIBA executive director Graeme Trudgill, says that brokers should view the rapid growth of the sharing economy as an opportunity.

“It has created a demand for new, innovative insurance products. Insurers and brokers who are able to react quickly to the market needs and produce flexible products could quickly steal a march on their competitors,” he says.

“It’s also important for brokers to recognise that while the sharing economy may be developing more rapidly across personal lines, it could soon have a real impact on the SME space too.”

For more information please speak to your local Zurich contact.