The 'sharing economy' is a relatively new but rapidly expanding economic model in which people 'borrow or rent assets owned by someone else’' These assets can include cars, boats, whitegoods, a ride from A to B or a bed to lay one's weary head. This peer-to-peer exchange is coordinated online – usually via a well-designed and easy-to-use smartphone app.
While you may not be familiar with the term 'sharing economy', you'll no doubt have heard of its star progeny: Airbnb and Uber. Started in 2008, Airbnb is a global network that connects travellers with hosts who provide short-term accommodation in their private homes, for a fee. For many travellers, it has become the first port of call when planning a holiday. Similarly, Uber connects riders with drivers, effectively wooing clientele who would otherwise catch a cab. The company started out in San Francisco in 2009 but has since expanded to more than 320 cities around the world, including Adelaide, Melbourne, Perth, Sydney, Brisbane, Geelong and the Gold Coast.
Though not without its detractors, this new economic model is reaping rewards for many individual operators and providers. But who's responsible when something goes wrong? In this brave new world of the sharing economy, who provides the assurance of insurance?
In a sharing economy, the onus of providing adequate insurance falls, more often than not, on the individual operator or provider, rather than the overarching company. That is, on the host rather than on Airbnb, on the driver rather than on Uber. The understanding is that users of these sharing services will cover all their own general costs, while maintaining the greatest share in the profit.
With Airbnb, there is an expectation when hosting people that the property owner will provide their own home and contents insurance. As set out in their terms and conditions, homeowners are expected to select appropriate insurance to cover any action or inaction taken by a guest in their house.
However, insurers may have discretion to refuse cover based on:
- the details of the policy
- lack of notification that a property is being used for short-term letting, which is deemed a change in circumstances.
As such, a host may find themselves exposed and unprotected if their property is damaged or if a personal injury or public liability claim is made against them.
Similarly, the expectation when signing up as a driver for ride-sharing company Uber is that you pay all operating costs, including fuel, income tax, superannuation or any insurance required. However, given that ride-sharing for profit is still illegal in many states in Australia, insurance policies have the discretion not to pay out for any damage that results while driving for Uber.
In Victoria, taxi transportation is covered under the Transport Operations (Passenger Transport) Act 1994, which sets out that a driver must be properly accredited in order to provide passenger transport – making Uber driving technically illegal. This means that any insurance issues that arise in the course of driving for Uber may not be covered under the policy, invalidating it due to engaging in illegal activity.
Services such as Airbnb and Uber generally provide some assistance with insurance-related issues, such as insurance gaps. However, ultimately the real obligation falls on the individual host or driver rather than the company.
In recent years, we've also seen the rise of locally run community-based groups that swap, sell and share goods and services, often coordinated via Facebook or other social media channels. These groups need to be aware that if a problem arises and a claim is made, the group may be liable as a 'party to the proceedings', which means they could potentially be a defendant in the case.
Advice from insurance lawyers to all individual operators and providers in the sharing economy is to take out adequate insurance to ensure proper protection. Don’t be caught out by an insurance claim dispute. Expect the unexpected. You'll be glad you did.