Sharing services, sharing products, sharing value, sharing risks? Here are the top 5 sharing economy insurable risks to be aware of and how to manage these risks:
1. Professional services and management decisions :
Exposures can arise from execution risk when sharing economy platforms develop innovative methods of offering services, products and investment. If you lack plans for business disruption, you face professional services risks as well as risk from management decisions.
2. Cyber threats and privacy breaches – Because platforms use technology to connect customers with product and service providers, cyber events can pose serious operational and reputational risks for sharing economy businesses. A cyber and technology insurance policy will typically provide a risk transfer solution for both first-party business interruption (BI) risks and third-party liability exposures from security breaches.
3. Business interruption Business interruption is an established class of insurance, with the policy trigger usually being physical or non-physical damage. Sharing economy businesses can experience a variety of business interruptions scenarios such as supply chain failure, fire/flood or other acts of God, as well as reputational damage, all of which could drive users away from the platform.
4. Property damage Damage to owned or third-party property while in transit or leased to a consumer can typically be covered by an insurance policy. However, fraud is an area of concern for underwriters, and the insured must have adequate protocols and procedures in place to mitigate the risk of property fraud.
5. Intellectual Property (IP) IP rights are only useful if you are able to enforce them – and enforcing or defending IP rights against infringement can be costly. You should consider taking out an IP insurance policy to cover the expenses of legal proceedings.
User fraud is a concern for insurers, particularly in relation to leased property. Terms and conditions should determine where liability arises in most cases, but if there is an unresolved dispute, there may be a legal claim against the platform for failing to sufficiently vet the user.
A solution is to ensure the platform has a ‘package’ policy that covers a range of different policies for different scenarios that may arise when running the platform. A key area is professional indemnity (PI) insurance, which covers the legal costs incurred as a result of claims from third parties for a failure in the provision of the technology platform’s services.
We recommend buying a package policy to minimise the risk of claims ‘falling through the gaps’ between policies, particularly for claims relating to privacy and security breaches, which can result from professional negligence covered by a PI insurance policy and can also be covered by a cyber insurance policy. General liability, including public, products and employers’ liability, should also be purchased for damage to goods and bodily injury to the public and the business’s employees.
About Elmore Insurance Brokers
We advise our clients to actively manage risk to optimise insurance. Insurance is a partnership between businesses and insurers. This partnership can be significantly enhanced by understanding and implementing risk management best practices.