Disruptive technologies, selling and buying new products and services introduce new insurance risks as well. I’ll highlight these and present current possibilities insurers offer for coverage.
Renting out your home through Airbnb
As policy holder of a home owner insurance joining Airbnb to rent out one or more rooms or your whole house to strangers include the risk of e.g. fire, liability or theft. Some cities have laws that restrict your ability to host paying guests for short periods. Renting out listed property to 3rd parties may be prohibited. In the Netherlands. Airbnb recommends that hosts obtain appropriate insurance for their accommodations. “Please review any insurance policy that you may have for your Accommodation carefully, and in particular please make sure that you are familiar with and understand any exclusions to, and any deductibles that may apply for, such insurance policy, including, but not limited to, whether or not your insurance policy will cover the actions or inactions of Guests (and the individuals the Guest invites to the Accommodation, if applicable) while at your Accommodation.” Large insurers like Nationale-Nederlanden, ASR, and Centraal Beheer now include this coverage in their clauses.
Acting as Uber driver
Though Uber is not accepted everywhere by governments or the established taxi companies, private drivers who do use their care to bring passengers from A to B, run additional risks compared to their regular drives, alone or with their families. Using your private car and time to do business (earning fares by picking up passengers and driving them to a destination) influences your position towards your employer (which by the way is not Uber) and insurer. In the U.S. MetroMile offers by-the-mile car insurers in several states. Since January 2015, it has partnered with Uber to offer personal coverage insurance to drivers, essentially guaranteeing that Uber drivers don’t have a gap in coverage when the Uber policy isn’t covering them. Technically, the company is an agency, not a carrier, and the product is underwritten by National General Insurance Group. Next to MetroMile, U.S. Uber and Lyft drivers or other ridesharing drivers are now helped as well by Geico, Progressive, USAA, Erie, Farmers, and AllState.
Owning or driving Connected Cars
Modern cars are computers on wheels. Once upon a time your car got a digital speed display, head up display (Toyota Prius, BMW), or rain and flat tyre sensors. Nowadays the manual for the entertainment system contains more pages than the owner’s manual for regular car components and maintenance. Being able to use a local WLAN, monitor the battery load process or run the apps you normally would see on your Android or iPhone on the car’s display is no exception anymore. In case of emergency your built-in cellular phone with SIM card will call for an ambulance. Your vehicle’s speed and location indicates navigation systems fed with similar cars’ data where traffic jams are, instead of unreliable RDS/TMC information sent through regular FM radio broadcasters. Our cars often run on Linux variants. The car mechanic – or should I say computer programmer? – connects his laptop to your car to get diagnostics. What happens to your car not having the latest update? Would your insurer blame you when you causing an accident, when your forward collision warning module wasn’t running the latest version? In July, Jeep owners were urged to update their cars after hackers took remote control. A security bug allowed remote attack of the Uconnect system, letting hackers apply the brakes, kill the engine and take control of steering over the internet. Uconnect is used in Jeep, Chrysler, Dodge, Fiat, Ram and Mopar cars since 2013. Is the BMW ConnectedDrive system unaffected? Can hackers enter your FleetGo app or Skoda’s SmartGate, and modify critical data? Hacking a Tesla Model S needs physical access to the on-board computer, researchers found. The August 6, 2015 lookout.com blog post that boasts their findings also recommends to set up an over-the-air patching system to avoid recalls. Who’s liable if problems arise?
Facebook influencing your credit score which determines your insurance premium
Your credit score is used by financial institutions as an indicator of your risk appetite. Institutions and companies use your credit score to determine how likely you are to repay your debts. Running financial risks imposes a risk of not getting money back. This has a lot to do with the rate for insurances, the premium you pay to an insurer. There’s a statistical correlation between your credit score and how likely you are to file a claim, and insurers use this correlation as the reason for the practice of raising rates for drivers with bad credit. Enter Facebook, that already offered companies to determine credit score based on friendships and activity on their social network. In 2012 Facebook bought a bundle of patents from the now defunct social network Friendster. Facebook used this patent, and recently secured it. Formally, it’s not clear if Facebook would ever try to use the patent for lending, or how exactly it would work. There is also a federal U.S. law, the Equal Credit Opportunity Act, that strictly regulates what criteria creditors can use when deciding on a loan — things like income, expenses, debts and credit history determine creditworthiness. In between the lines I read an already existing practice which isn’t in sync with regulations.
A business need for Cyber Insurance
“J.F. Rice” in a July post on ComputerWorld Hong Kong investigated the business need and model for a cyber insurance. The coverage can pay for the costs of investigating, reporting and re-mediating the security breach. Some insurers directly exclude most of the real-world threats we are concerned about, and placing unreasonable limits on others, while providing coverage for the less likely scenarios. There are that do cover computer hacks or malware installed by employees. Those policies cover the costs of forensic investigation, notifications and cleanup.
Both consumers and insurers need to rethink risk appetite and threats associated with application of all kinds of new technology and innovative business models.