Industry urged to embrace ‘sharing’ economy

The traditional divide between personal and commercial lines could blur as demand for new insurance products emerge from the ‘sharing’ economy, the author of a new report on the issue said at the CIP Society symposium earlier this month in Toronto.
Paul Kovacs, executive director of the Institute for Catastrophic Loss Reduction, said insurers must modify their products to meet new demands.
The report, ‘Sharing Economy: Implications for the Insurance Industry in Canada,’ has been published by the Insurance Institute as part of its emerging issues research series.
“The fact (is) that there are a lot of Canadians engaged in sharing, and the traditional products that we offer are traditionally compartmentalized into personal and commercial and people who are doing (sharing economy) activities are in both fields,” Mr. Kovacs said at the symposium.
He said some insurers have already started to adapt to the sharing economy but more products and innovation are needed.
An even more significant change will be the opportunity for the insurance intermediaries, he said.
“You have a lot of people participating in the sharing economy that haven’t gotten around to thinking about insurance yet.”
For example, more than 20,000 people were engaging in ride sharing before any ride sharing insurance coverage was available.
“And there was no legal product that they could have had so they did not have a product specifically for them,” Mr. Kovacs said.
“So there are a lot of Canadians participating in the sharing economy, and they don’t really know they don’t have the insurance coverage they should have, and explaining what is available and what not, what is covered and what is not is a really important opportunity for our industry to do in a deeper, more careful way.”
The sharing economy may not just disrupt insurance product offerings but also the industry itself, Mr. Kovacs said.
He said if events in similar jurisdictions, such as Europe and Australia, are any indication it is clear that change is coming.
Some new companies are simply using older insurance principals, such as mutual insurance.
Other companies are taking an entirely new approach, he said.
“And whether it will catch on is unclear,” Mr. Kovacs said.
“But there is no question that change is coming and only time will determine how important it is.”
He said this is a good time for Canadian companies to keep an eye on the rest of the world to see how changes take hold in other countries with similar markets.
Other corporate entrants will see themselves as intermediaries looking to partner with traditional insurers, paving the way for the industry to disrupt itself.
“Which will bring more ideas and inno-vation and some companies are going to want to partner with (them),” he said.
“They think they have new approaches and techniques (and) it will be intriguing to see how they come.”
Mr. Kovacs said it remains to be seen whether any of these new entries will even be categorized as insurance.
“That will be unclear to the industry and regulators.
“So disruption . . . (is) coming in to compete directly with insurance companies, others to compete with brokers and some are just coming and I don’t know what they are but (they are defined as) insurance.”