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brown brick houseWhat Does The Future Hold?

Last week, we talked about the "Sharing Economy" - vacationing by renting homes through companies like airbnb, VRBO and Couch surfing. Let's now look at how these services will impact our future.

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Of course, the Sharing Economy raises issues beyond insurance — there are legal implications as well, and cities and states are beginning to respond. Three states, (California, Oregon and Washington) have passed laws regarding peer-to-peer car sharing, and cities, such as New York, are starting to address those who rent rooms, apartments, etc., on a short-term basis. We expect more government regulation as peer-to-peer sharing becomes more frequent.

In addition to start-ups, larger companies are starting to move into the space (such as Avis Budget Group, which purchased car-sharing company Zipcar), and many in younger generations hold positive attitudes toward sharing. Both of these factors indicate that continued growth is likely.

But while there’s plenty of room for growth, don’t underestimate what’s happening already. Although data suggests that car sharing is still relatively small, short-term lodging service airbnb served 5 million guests over the past year, according to Accenture, and top hosts in New York can gross more than $400,000 annually.

Sharing isn’t necessarily a bad thing for the insurance industry. Though it raises significant issues (both known and unknown) for carriers and agents, there are potential business benefits as well. For example, as Mang and Wilt write, “The new insurance ideas that come from rigorously thinking through issues in car sharing may be unexpected — car sharing may drive important developments in the use of telematics/UBI (usage-based insurance) technologies; innovators may end up creating new risk products ... or insurers may find interesting ways to connect millenials and define the next important affinity group for product distribution and service.”

While some estimates put the total peer-to-peer market at more than $25 billion, there’s no clear direction for the insurance industry yet — though the Sharing Economy clearly impacts both commercial and personal lines policies.

Currently, we are monitoring developments, responding where necessary (such as in states that have passed new laws) and giving careful thought as to where this trend will lead. Some may see sharing as a threat to current insurance business models and no carrier has found a way to transform it into a unique value proposition — yet.

But some feel that day is coming. As Accenture’s Michael Costonis writes, the insurance industry “is perfectly poised to help ... by using its expertise to minimize risk and create products that fit the unique needs of the Sharing Economy.” And those who move first, he adds, will be the ones who help shape how the sharing business models evolve.

“Insurance companies have always been leaders in developing products and services that meet market needs. ...” Costonis writes. “It’s time for them to determine if the (Sharing Economy) opportunity is worth the risk.”

If you are interested in renting your home and need proper Indiana home insurance, give TCU Insurance Agency a call at 800-772-8043. We can help you figure out what you need to make sure to protect your home, belongings and family.

Source: Liberty Mutual Insurance
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