Insuring the sharing economy

UBER/AIRBNB: IS YOURS PROTECTED? Personal cover isn’t enough.

The sharing economy has very quickly gained wide acceptance. It’s now possible to rent everything from luxury yachts to shoes.

But the rise in sharing economy apps has also given rise to regulatory headaches, and to a number of complex legal problems, says Daniel Breier of Norton Rose Fulbright.

“Many commentators are of the view that the biggest obstacle to the further expansion of the sharing economy is insurance,” says Kelcey Smith at Norton Rose Fulbright. “If this is not overcome, it can actually lead to the decline of these types of businesses.”

South Africans who are using their vehicles as Uber transport, or renting out properties on Airbnb, may not have considered what this means for their insurance cover.

“Traditional insurance does not provide adequate cover for the types of activities on which the sharing economy relies,” says Smith. “Policy holders might find out the hard way that their commercial activities are not covered by their personal insurance policies. This is because, generally speaking, standard insurance policies are not fit for occasional sharing practices.”

Anyone using their car for Uber must have commercial vehicle insurance with passenger liability. Personal use policies won’t cover loss, liability or damage if the vehicle is carrying passengers who pay a fare. Some policies will allow ride sharing, but only if it’s not done for profit.

Taking out commercial cover is, however, very expensive. This means if someone only wants to use their car for Uber over the weekends, it may not be practical. The vehicle owner is therefore left with the option of just taking the risk or foregoing that opportunity altogether.

Property owners using Airbnb face similar issues.

“Your typical homeowner’s policy may carry a business activity exclusion in terms of which any claims arising from that would be denied,” says Smith. “Certain policies may expressly exclude cover where the home is being used as a bed and breakfast.”

Airbnb falls into this exclusion. So, if this is the only cover you have and your property is damaged by someone renting it through Airbnb, the insurer can deny the claim. South Africans engaging in the sharing economy need to be aware of what their insurance will/won’t cover, and whether they need to increase their cover. For insurers, there’s also the opportunity to provide specific solutions that meet this market’s demands.