Who should bear the risk in the sharing economy?
The sharing economy in the UK is predicted to be worth £140 billion by 2025 and with that comes an unrivalled opportunity for property insurers who can provide truly flexible insurance for both providers and users of home, office and warehouse sharing.
However, the fragmentation of assets requires a number of issues to be addressed. The line between personal and commercial lines begins to blur where personal assets are used for commercial purposes and liability as between user, platform and provider continues to be divisive. A report from Lloyd’s in April 2018 showed that 97% of users surveyed believed that the sharing platform provides some sort of protection for users and providers but only 28% had looked in detail. It is also clear that the overwhelming majority of users and providers would be more comfortable using or sharing such services if more insurance was available.
There are therefore significant growth opportunities for both the sharing economy and insurers, but any insurer entering the market will require a detailed review of their product design, underwriting, distribution, pricing and claims handling.
Will new InsurTech developments dilute liability for leaks?
The question of where liability should rest will again be the focus as the Internet of Things is introduced into our properties. In last year’s report we highlighted the benefits of leak detection systems but the issue now to be considered is whose responsibility it is to act where a notification is received.
The question of who should be notified and responsible for taking action will have serious consequences. It could introduce fresh arguments on causation, absolving manufacturers of liability and shifting the burden onto the person notified of an imminent leak. Will that bring into the mix property owners or third-party service providers, which in some scenarios could even be insurers? It is yet to be seen to what extent terms and conditions may try to allocate or limit such liability, although attempts to do so may jar with changing consumer expectations.
Similar issues will arise where an electrical device malfunctions and then catches fire or a camera within a building shows a break-in in progress. The silo mentality in insurance is being eroded time and again as technology advances. Insurers need to be ready to advance with it.
Insurance products need to reflect all possible exposures from terror attacks
The exposure of insurers to terrorism is evolving. Historically the focus was on first-party risks, but more recent incidents extend to third-party risks arising principally from personal injuries. Pool Re’s Terrorism Frequency Report published in April 2018 confirms that casualties have increased and property damage losses have decreased.
These attacks include the targeting of civilians in crowded areas rather than the buildings themselves. Such events have been geographically disparate, with incidents including New York, Barcelona, London, Manchester, Paris, Nice, Stockholm and Brussels. This suggests an established trend rather than an isolated occurrence and is a world away from the IRA bombings and other historic attacks by terrorists, where property damage was often the focus.
Insurance products will need to ensure that this is reflected in the cover they provide. Insureds require protection from claims that they failed to prevent an attack, perhaps due to inadequate security measures or evacuation procedures. Such exposures can be fairly broad-based, from customers, employees and the public, so this has the potential to impact a wide range of insurance products.
Subrogated recoveries – what has adjudication got to do with it?
As the courts become busier due to increased caseloads and limited resources, insurers will have to explore and adopt alternative means of pursuing recoveries. We predict that insurers will increasingly explore adjudication as an alternative method of dispute resolution in the years ahead.
Pursuing a claim through the Technology and Construction Court can take a number of years from issuing proceedings to judgment. It can be frustrating for an insurer to be left out of pocket for this amount of time despite having a strong recovery claim. For property and construction insurers who have paid out on losses arising from construction works, adjudication offers a comparatively quick and cost effective route to achieving their recovery. Provided the insured has a contractual relationship with the proposed defendant and the loss arose from a construction operation, the insurer can refer the matter to adjudication rather than litigate. A typical adjudication takes 28 days from commencement of the adjudication to the decision, although this period can be extended by agreement. Once issued, the decision is binding and enforceable through the courts.
The full 'Insurance Remodelled: 2018/19 Market Conditions and Trends' Report can be accessed here: