What’s Mine Is Yours…for A Fee

The sharing economy is a term that describes the peer-to-peer economic model in which individuals can rent or borrow assets (goods and services) owned by someone else. Other names include the gig economy and access economy. While the practice is not new, due to the rise of Internet commerce, it has rapidly expanded in the last decade and is estimated to grow to a $335 billion business by 2025. Such rapid growth is understandable considering anyone with reliable Internet access can partake. Companies such as Uber, Lyft, and Airbnb are leading the way with global operations and millions of users worldwide. While such easiness makes these platforms accessible, they also present pitfalls and dangers that are not present in other forms of commerce. Whether you are thinking about joining the sharing economy or are already partaking, realize that there are dangers.

At its core, the sharing economy is built upon trust. The model depends upon peer-to-peer interactions. Many of the legal and regulatory protections found in traditional service-oriented businesses often do not apply to the sharing economy. This type of business model can leave you vulnerable to discrimination, harassment, and, the worst case scenario, put your safety at risk. How do you know if the person you rented a room from has a violent criminal history or if your Uber driver is on his third DWI? While certain municipalities have introduced some safety-oriented measures, to date the regulatory environment remains poor.

Such vulnerability makes it essential for you to inform yourself on the companies and individuals with whom you are dealing. A simple way to accomplish this is by reading the reviews. A good predictor of future behavior is past behavior. You are better off with users who have a well-documented, positive history. Look for comments on professionalism, work quality, cleanliness, safety, and other essential factors. If any unanswered questions remain, reach out to prior contacts, who have used that service for first-hand information.

For the companies themselves, research is critical. Some companies have been around for many years now, and a quick Google search and company website review will reveal much-needed information such as policies against discrimination/harassment, safety measures, and complaint resolution. Only use businesses that have established records of accomplishment and recourse measures in the event something unfortunate ever does occur.

What if a guest you rented a room to burns down your home while using the fireplace. Say you are involved in an auto accident while dropping someone off at the airport as an Uber driver. With these types of risk, it is critical to have the proper insurance coverage.

The problem is that many people are unaware of exclusions and restrictions found in both business and personal policies that void or reduce coverage for acts commonly associated with the sharing economy. For example, personal auto policies exclude coverage for vehicles used in Taxi (driving people for a fee) operations. Therefore, if you drive your car for Uber you might find yourself without coverage. The same can apply for lending your vehicle for a fee or renting out your home.

To combat this, you should review your current policies and consult your independent agent to note any coverage restrictions or exclusions that may apply to your situation. Such professionals will be your best source for coverage information. They will also be able to get you the insurance you need to make sure you’re adequately covered for the extra exposure.

Some of the larger peer-to-peer companies offer insurance. For example, Airbnb offers host insurance that provides up to $1 million in coverage for liability claims. Review these policies because they may be overly favorable to the company or contain language that offers an extra layer of coverage to your personal or business coverage.

In the end, the sharing economy is here to stay and will no doubt continue to be impactful, providing easy access to goods and services for us all. Just remember to verify and carry adequate insurance to manage its associated risk.