Let's say you've rented a room online through a sharing portal. The boiler in the flat has been improperly serviced and you get second-degree burns while taking a shower. You decide to sue the host. The person who let the room to you might think the sharing portal should carry some responsibility or that their home insurance should cover their liability.
However, the owner's home insurance is likely to exclude commercial activity and the sharing portal provider might not have any strict legal responsibility to cover the liability either.
The sharing economy, an economic system based on the use of technology to share assets of services between individuals, has grown globally from an estimated US$15 billion in 2014 and is expected to become a $335-billion business by 2025, says PwC. A study by MDEC-Monitor Deloitte Analysis says the sharing economy was worth $270 billion globally in 2016 and is projected to reach $3.1 trillion by 2025.
The sharing economy encompasses a range of business areas, but broadly, includes peer-to-peer transport, accommodation, tools and food; on-demand personal and professional services; business-to-business tools; business-to-crowd physical items; and collaborative finance. Growth is fuelled by the desire to make money from underutilised assets and the view that it is typically more environmentally friendly to use fewer resources.
In a 2014 study, Nielsen found that countries reporting the highest response rates for likelihood to utilise products or services from others in a sharing community include China (94%), Indonesia (87%), Slovenia (86%), Philippines (85%) and Thailand (84%).
Although sharing practices have historical roots, they are re-emerging and blossoming thanks to new technologies that bring strangers together and facilitate mutual trust, writes Sofia Ranchordas, assistant professor of Law at Tilberg Law School in the Netherlands. Trusting in the kindness and honesty of strangers can be rewarding or deceiving, which is why these practices are never risk-free.
"Trust, however, is a big issue when it comes to the sharing economy," said Vilaiporn Taweelappontong, a partner at PwC Thailand.
The big question in the sharing economy is who bears the risk of something going wrong -- the platform provider, the asset owner or the client? Recent research by Lloyd's shows that addressing that risk will facilitate growth in the sector as uncertainty is mitigated.
What Thailand can learn and apply: In recent research that Lloyd's of London conducted in China, the UK and the US, we discovered a reticent consumer market for sharing economy participation in the UK and the US due to concerns about personal safety, quality of service, damage to assets, theft and lack of sufficient safeguards if something goes wrong.
The majority of consumers globally would be more likely to use sharing-economy services if insurance were offered, while service providers believe overwhelmingly that they would have more customers if the platform offered insurance cover.
Moreover, the sharing economy platforms themselves acknowledge the importance of insurance, with 83% stating they believe it could influence a subscriber's decision to use their service. Risks for the platform service providers, such as Airbnb and Uber, include intellectual property theft, trust and reputation loss.
Another potential source of loss for platform providers comes from regulatory risk. For example, In November 2012 the California Public Utilities Commission fined Uber $20,000 for "operating passenger carriers without evidence of public liability and property damage insurance coverage" and "engaging employee-drivers without evidence of workers' compensation insurance".
The question of whose liability it should be if things go wrong is answered differently by the three participant groups in the sharing economy. In China, a large majority of respondents (71%) believe the sharing economy platform should assume protection for the consumer, with only 21% believing it is the provider's responsibility and 8% suggesting consumers themselves should provide their own protection.
In the US, 43% of respondents felt the platform should protect consumers, with 40% believing the provider should protect them and 18% suggesting consumers take responsibility. In the UK, the corresponding figures were 39%, 39% and 22%.
When asked who should pay for provider protection, 66% of Chinese respondents said the sharing economy platform, while 46% of UK and 50% of US respondents said providers are responsible for their own protection.
Thailand has above-average trust, connectivity, literacy, digital payments and entrepreneur-friendliness, says Dalberg in its Digital Sharing for Growth research report. Its research suggests that digital sharing initiatives that aim to address development challenges in markets such as Thailand will need to incorporate three principles: trust, smart sharing and affordability.
While those are necessary, scalability will depend on the ability to expand the digital footprint, build literacy, and exchange digital information and payments, as well as effective regulation.
"Companies need to engage themselves in shaping regulatory and policy frameworks through developing and complying with the law to legitimise their offerings to consumers and avoid unnecessary lawsuits," said Ms Vilaiporn of PwC.
What this means for insurers: Insurers have long provided coverage for "tangible" physical assets, but in the sharing economy assets are often intangible. They are also fragmented as they are owned and shared among various parties, requiring a different approach to risk management based on the behavioural economics of consumer preferences and attitudes towards risk.
Our work with sharing economy platforms has demonstrated that insurance enables growth, and can also be adapted to grow along with sharing economy companies. Giving consumers confidence through clear definition of and protection against risk removes barriers and promotes product trial. This also applies to startups for which bespoke policies can evolve as the companies grow into global industry disruptors such as Airbnb and Lyft.
When the sharing economy is creating a completely new risk landscape, the importance of insurance cannot be understated.
Formally identifying risks and indemnifying users against them provides peace of mind, while asset owners and platforms share a sense of clarity. Tailoring insurance solutions around these new risks will give all participants in the sharing economy more confidence and facilitate healthy growth.
Kent Chaplin is the CEO of Lloyd's Asia Pacific, part of the global specialist insurance and reinsurance market.