How insurers can reclaim value in the sharing economy

By Matheus Riolfi

The innovations of companies like Uber, Lyft and Turo offer exciting options for consumers and small businesses, but they have also created complexity in the insurance space. Across cities worldwide, rideshare drivers shuttle passengers while delivery vehicles zip between neighborhoods, each representing a new challenge for an industry built on traditional risk models.

The insurance industry has developed reliable models with decades of data to underwrite and assess risk for personal and commercial vehicle usage. The industry has done well by leveraging new data from telematics and original equipment manufacturers to become even better at assessing risk for both personal and commercial-use vehicles. Claim submissions and processing have made leaps and bounds in the last several years getting smarter, using more and more data and reducing wait times for consumers. However, when it comes to the sharing economy, much of this data is no longer valid. The patterns of usage and risk are different, and the industry hasn’t yet broadly evolved to handle this use-case.

The global sharing economy is expected to be valued at $790 billion by 2028 and the market is ripe for insurance innovation. Approaching this market requires the industry to understand the nuance and complexity and make use of data in new and sometimes challenging ways, all while serving customer experiences that modern buyers expect.

Consider insuring a vehicle used for both personal transportation and ride-sharing services. Current commercial auto policies assume consistent commercial usage, while personal auto policies explicitly exclude commercial activity. This represents significant coverage gaps and pricing inefficiencies that impact both carriers and insureds.

While traditional underwriting relies on historical data and clear usage patterns, the sharing economy platforms generate real-time data that could revolutionize our risk assessment if we properly harness it. Additionally, the distinction between on-app and off-app usage creates complex liability scenarios that traditional policies weren't designed to address. Claims adjusters are forced to navigate intricate coverage questions when incidents occur during status transitions or in gray areas between on-app or off-usage.

The opportunities for insuring the sharing economy

While the sharing economy presents unprecedented complexity for insurers, I’ve identified several strategic approaches that can transform these challenges into opportunities, delivering both simplicity for carriers and seamless experiences for customers:

The right coverage, at the right moment. The sharing economy, especially in the mobility sector, isn’t one size fits all. Traditional auto policies are often designed for individuals or businesses that have cut-and-dry usage. Usage is either personal or it is commercial.

But what about when your vehicle is used on a rideshare or ride-hailing service? A traditional commercial policy may provide excessive coverage for sharing economy participants who only need coverage part of the time. In other words, if you list your car on a platform, you likely need a different type of coverage for when your car is booked on that platform as opposed to when your car is parked in a storage facility.

Why pay full price for a policy designed to cover it 100% of the time, when you only need coverage if your vehicle isn’t booked on a platform? Creating the right coverage, designed for the moments when consumers need it, creates more value and acknowledges different risk profiles for different moments in time that the car is being used.

2. Data-rich underwriting innovation. The wealth of operational data from sharing platforms presents an opportunity to revolutionize underwriting practices. Modern insurtech platforms can leverage data from both the sharing platform and individual vehicles to better assess usage data, engagement metrics and loss ratios to create more accurate risk assessments than traditional underwriting methods alone. The key lies in developing systems that can process and analyze this data stream while maintaining compliance with privacy regulations and underwriting guidelines.

3. Technological infrastructure flexibility. Success in the sharing economy requires technological infrastructure that adapts to each use case and/or partner's unique needs. Insurtechs are poised to enable this flexibility if they can:

- Build proven technology platforms that allow non-insurance brands to distribute relevant insurance compliantly.
- Build trust and deep relationships with sharing economy platforms.
- Leverage accumulated data to provide underwriting guidance.
- Quickly onboard and launch new programs.

The path forward is building relationships with insurtechs

The sharing economy isn't just another market segment - it represents a fundamental shift in how we must approach insurance. Success requires rethinking traditional underwriting assumptions and developing new frameworks for assessing and pricing risk. These advancements won’t mean much in terms of premium generation without effective methods of distribution. That’s where a new wave of insurtechs comes in.

For carriers and brokers, the opportunity lies in partnering with organizations that have built the technological infrastructure to support these new insurance models, have close relationships with noninsurance brands, and can offer rich data that continues to grow as programs mature. Such partnerships can create profitable programs while solving real coverage challenges for sharing economy participants.

As the sharing economy continues to evolve, carriers, brokers and underwriters that embrace these new approaches to risk assessment and coverage will be best positioned to capture this growing market. The future belongs to those who can combine deep insurance expertise with technological innovation to create products that truly serve this new economy.

Matheus Riolfi is the cofounder and CEO of Tint. Contact him at [email protected].