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Lloyd’s flags coverage gap in sharing economy

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Lloyd’s is encouraging insurers to play an important role in growing the sharing economy by offering new types of cover to participants.

The London market’s Innovation report says the lack of insurance for different risks in the sharing economy is inhibiting its growth.

Lloyd’s surveyed 5000 people across the US, UK and China: 70% of those not in the sharing economy would be more likely to offer a product or service through such a channel if it was protected by insurance; 71% would use such a product or service if insurance was offered.

Only 16% of consumers report sharing a product through the sharing economy.

Differing views on whether platforms, consumers or product providers should be responsible for managing risk are a barrier to growth, the report says.

About 78% of sharing economy providers say they would get more customers if sharing platforms offered insurance solutions. Most sharing platforms surveyed say either the consumer (53%) or the provider (27%) should offer insurance.

Personal safety is considered the highest risk (52%), followed by service quality (42%), damage to assets (42%), theft (40%) and lack of safeguards if something goes wrong (38%).

The sector is dangerously exposed to these risks, according to the report. About 97% of consumers mistakenly assume they are protected by some form of insurance. However, only 28% of survey respondents report investigating the matter.

Clear regional differences emerge, with China recording the most consumers and service providers in the sharing economy. About 49% of US respondents have never used a sharing economy product or service. Some 58% of respondents in the US and UK say the risks outweigh the benefits.

Because assets are shared between multiple parties, and are often intangible, a different approach to risk management is required, based on the behavioural economics of consumer preferences and attitudes towards risk, Lloyd’s says.

It can be difficult for traditional insurance to be applied to the sharing economy, which is expected to grow to $US335 billion ($431.14 billion) by 2025.