Sharing in the “sharing economy”: What happens when things go pear-shaped?

By Chris Dougherty, General Manager, Westlawn Insurance
18 March 2015

There has been plenty of talk about the so-called “sharing economy” in recent times.

Online services such as Airbnb (as we discussed in a recent article), Airtasker, and the ride-sharing service Uber allow us all to unlock the value of our assets by sharing our homes, cars and even our labour, while at the same time providing consumers with greater choice. It’s therefore no surprise that these services have been quickly growing in popularity – both on the supply and demand side.

And as we venture further into this sharing economy for everything from finding a place to stay for the weekend, arranging a ride into town, or getting someone to come mow our lawns, there are still many issues that remain unresolved in regards to compliance, legality, and, of course, insurance.

So, what happens if things go pear-shaped while participating in the sharing economy?

For example, if you were to rent out your home for the weekend through Airbnb, would your home & contents policy cover you for any damage or theft? Or, would you need landlords insurance? What if you just rent out a single room?

How about if you make a little pocket money by driving paying passengers around town, will your car insurance cover you in a crash?

And what if as an Uber passenger, you’re injured in a car accident?

These are just some of the questions regulators, governments and the insurance industry are currently dealing with in regards to the sharing economy.

Speaking to Insurance News, Vicki Mullen, from the Insurance Council of Australia said: “It is inevitable that the sharing economy will continue to grow and develop. The initial challenge is for governments to consider whether such platforms are subject to current safety regimes, whether existing laws apply and if there are definitions that need to be extended.

“In terms of insurance, there are two issues for the seller of the service. Firstly, is the activity legal? If not, then there is a problem straight away with claiming on an insurance policy. Secondly, if it is legal, then is the provider fully compliant with safety regimes?”

On the issue of whether a retail insurance policy would respond in the event of a loss, Mullen said: “This will come down to the particular policy, but it may not respond if a domestic asset is being used for commercial purposes, particularly if the activity has not been disclosed”.

Similarly, Allianz GM of Corporate Affairs, Nicolas Scofield said that “motor policies will usually not respond to damage that arises from using your own vehicle for ride-sharing services.”

“Our product disclosure statement says claims will not be paid if passengers are being carried for hire, fare or reward, unless it is under a private pooling arrangement”.

Is Uber even legal?

The question of legality, as raised by Mullen, particularly applies in the case of UberX, the ride-sharing service that connects drivers with people seeking a ride via a smartphone app. While firmly entrenched in many major cities around the world, it still operates illegally in many of them … including in a number of Australian cities.

A June 2014 Sydney Morning Herald article headed, NSW cracks down on Uber ride-sharing, stated that:

The NSW government has begun cracking down on the ‘ride-sharing’ component of the smartphone app Uber by issuing $2,500 fines and threatening legal action against motorists who offer the service.

“… The crackdown by NSW’s Roads and Maritime Services follows similar action by the Victorian government in early May. It issued more than $50,000 worth of $1,700 fines to drivers.”

Like their southern counterparts, the Queensland government has also been embroiled in a battle with Uber. In August last year, the Gold Coast Bulletin ran a story:

Private “taxi” service Uber defies State Government and launches on the Gold Coast.

“Controversial “private taxi” company Uber has launched on the Gold Coast despite the State Government maintaining a ban on the ride-sharing service,” the Bulletin reported.

“Queensland Transport Minister Scott Emerson issued a cease-and-desist notice in May, warning the company it needed to meet existing taxi service laws, including driver accreditation and vehicle standards.

“But Uber has continued to operate in Brisbane and forged ahead undeterred with the Gold Coast launch.”

The January 2015 JP Morgan/Taylor Fry General Insurance Barometer highlighted similar concerns as those raised by Mullen and Scofield writing that: “The insurance implications for Uber users in Australia are particularly concerning, as the Insurance Council of Australia (ICA) is not aware of insurance products in Australia that cover ride sharing.”

“If an insurance company proves a driver’s actions to be illegal (for example, a non-commercial driver in a non-commercial vehicle receiving a fee for service), a claim against the insurance policy can be denied.”

Will home insurance accommodate Airbnb services?

While property owners providing accommodation through Airbnb haven’t been subjected to the same legal minefield as UberX drivers, the service has not been without its controversy, as we reported in making money from holiday rentals.

And like UberX, anyone looking to make some extra money through Airbnb needs to consider where they stand in the event something goes wrong.

“Home policies will not usually respond to damage caused by people invited in by the homeowner,” said Scofield.

“There is a duty of disclosure. If there is a change in use then the insurer needs to be informed. Policies might be able to be revised and additional premium paid for additional risk”.

According to insurer QBE, “consumers need to be sure they are covered, either through their own policy or that of the company they are engaging with or a member of”.

QBE’s householders policy “would not be voided by peer-to-peer letting services if the insured rented out spare rooms, but theft or malicious damage by anyone on the property with consent of the insured would be excluded. If a whole property were to be let on a peer-to-peer basis, the insured property would not be covered and would need to obtain landlord insurance”.

Thinking of joining the sharing economy? Get advice first

Whether it’s driving for UberX, doing odd jobs through Airtasker, or opening up your home for accommodation, speak with your Westlawn Insurance Broker before diving in for your share of the sharing economy … you just never know when things could turn pear-shaped.

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