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Sharing economy seeks opportunity to insure with captives

Posted On: Mar. 15, 2017 12:46 PM CST

SAN DIEGO — As the sharing economy continues to grow, so does interest in captive insurers to solve complex coverage dilemmas, according to experts weighing in on liability, regulation and the trend of connecting consumers and service providers via technology platforms. 

“The shared economy is exploding,” Tina Summers, San Francisco-based senior vice president and consultant with Marsh Captive Solutions, told attendees during a session of the Captive Insurance Companies Association International Conference in San Diego on Tuesday, standing beside a slideshow screen featuring the logos of more than two dozen service companies that offer everything from ride-sharing and tool-sharing to home rentals and dog-watching. 

“I am based in San Francisco, so I can see it everyday,” she said. “The biggest challenge is how to price the risk.” 

Because of the unique business approach — and the ever-changing regulatory landscape for such platforms as Uber Technologies Inc., Lyft Inc. and Airbnb Inc. — “dozens of these companies are exploring (captives),” she said, adding that she knows of five that have already fulfilled part of their insurance needs with a captive. “We are in talks all the time; they want to see if (captives) can solve some of their problems.”

Also notable is that the usual continuum for businesses seeking to fulfill insurance needs via a captive is a years-long process that usually begins after much time in the traditional market — but not so in the sharing economy. 

“What we are seeing with the sharing economy is they are forming and going to captives within a year; it’s novel in the insurance industry,” she said. “(Those who form these) companies tends to be risk-takers; they feel more confident in their risk than most companies.”

Francois Morissette, Los Angeles-based principal with Oliver Wyman Actuarial Consulting, Inc., said some of the challenges include the lack of data when underwriting the risk for some innovative companies. “It’s challenging from a loss experience; it’s hard to know. There is not enough (data) to tell you,” he said.