The sharing economy’s “seismic and disruptive changes to established industries have introduced new and different risk, or at least a risk that might not have been contemplated in the brick-and-mortar industries of yesterday” Goldberg Segalla’s Todd D. Kremin and Peter J. Biging write in Mealey’s Emerging Insurance Disputes.
In their essay, Todd and Peter treat the “sharing economy,” a broad term for primarily online economic activity spanning everything from peer-to-peer sharing of access to goods and services to major multinational businesses that disrupt industries and create new paradigms of production, service, and consumption. “While ride-sourcing, peer-to-peer travel accommodations (e.g. homesharing), and music sharing may have dominated the headlines, new services and platforms are frequently emerging,” Todd and Peter write — and governments struggle to craft legislation and regulation to keep pace with advancing technology and evolving economic models. This leaves emerging business sectors, like financial technologies (fintech), without “uniform guidance from regulators or the courts,” and “confronted with a host of unique legal and logistical issues, ranging from licensing to risk management.”
While the sharing economy businesses themselves face risks, so too do their insurers. Aside from cyber risks inherent to any online transaction, sharing economy businesses generally “rely on the resources of a collective,” redistributing exposure in unprecedented ways. For example, ride-sourcing companies (like Uber and Lyft) “use their drivers’ vehicles (i.e. the collective resource) rather than maintaining a dedicated fleet of livery cars,” while “peer-to-peer travel accommodations” (like Airbnb) “utilize user-owned/occupied real estate.” Meanwhile, fintech companies will face “alleged regulatory violations” and exposures for “operation or technical errors” along with “many of the same risks as their more traditional counterparts.”
Todd and Peter go on to treat issues specific to ride-sharing or -sourcing, home-sharing, and fintech, including coverage gaps and a deluge of various civil lawsuits from users as well as established competitors operating on traditional models — which they expect “the enterprising plaintiffs’ bar” to continue “for years to come.” Meanwhile, the failure of legislatures and regulatory agencies to keep up with these changes — like, for example, the fintech industry’s use of artificial intelligence, algorithmic trading, or investment advice based on big data — only amplify uncertainty as these new businesses disrupt industries and alter expectations, moving forward without the surety of sufficient coverage.
“The insurance industry has and will continue to adapt to this risk at a breakneck pace,” Todd and Peter write, “but must be cognizant to keep stride with the changing laws and regulations governing the various industries that have moved largely to cyberspace.”