Insurers race to keep up with sharing economyReprints
PHILADELPHIA The sharing economy is exploding, but insurers are having trouble keeping up with the pace.
The on-demand economy was estimated at $26 billion in 2015, but is projected to grow to more than $300 billion by 2025, according to an analysis by Oliver Wyman Group, a division of Marsh & McLennan Cos. Inc.
But the business is challenging for insurers because of factors such as the regulatory environment, Jose Heftye, San Francisco-based managing director and sharing economy practice leader with Marsh L.L.C., said at the Risk & Insurance Management Society Inc.’s annual conference in Philadelphia on Tuesday.
“This is a space that is evolving really, really fast, so it is very difficult for the insurance markets to keep up to speed — they’re developing a product and then trying to catch up on the next version and the next version because of the filing process and all the due diligence an insurer needs to go through,” he said.
“A lot of these companies are startups, so there is no public financial information available for (insurers) to understand their credit exposure. These companies are so new and their business models are so new that we don’t have 10 years of historical information in losses that is going to support a traditional underwriting model.”
Carolyn Yashari Becher, co-founder and head of policy and people with Los Angeles-based HopSkipDrive Inc., a ride-sharing service for kids age 6 and above, said confused regulators were eventually swayed by the company’s risk management strategy, which features a 15-point certification process for drivers, including fingerprinting.
“It took a little bit of convincing to get people on board with what we wanted to do,” she said. “Now that the industry has matured a little bit, we’re having a much better time getting our (insurance) rates to a place that will work for our business.”