With a growing number of consumers now taking part in the “shared economy,” insurers need to bridge the gap between personal and commercial insurance, says a new report from research and advisory firm Aite Group.

The shared economy refers to new companies that allow people to connect through online marketplaces or mobile apps to rent goods and services from each other, whether vacation rentals, cars or just a ride to the airport.

These shared services present a host of new risks for property/casualty insurers.

Traditionally, insurance policies for homes and cars are written for individuals or families looking to insure their property for their own personal use. Within the shared economy, however, individuals who own homes or cars are also letting others use their assets for a fee—and these other individuals are not written into the policy. Worse, these renters may not have any personal coverage of their own.

Most personal lines policies expressly exclude commercial use of the insured asset. Complications and gaps in coverage arise from the use of personal assets for a mix of personal and commercial use.

A new report by Aite Group, “The Shared Economy and P&C Insurance: Mind the Gap,” identifies these gaps and offers P/C insurers suggestions on ways to turn shared-economy challenges into opportunities.

Hospitality

There are two sides to shared services in the hospitality market: individuals who own or lease space and the guests who are temporarily paying to stay. Both owners and guests face liability.

A study by the Insurance Information Institute found that while 95 percent of homeowners have homeowners insurance, only 37 percent of renters have renters insurance. Those renters without their own policy rely on the home-rental companies for coverage—and many offer no or only limited coverage.

To remedy this gap, Aite recommends that insurers partner with shared-economy sites and link their insurance offerings to member signup. This partnership will remind consumers about additional options for insurance at a logical step in the workflow while connecting those consumers to insurance partners that can sell them policies, such as renters insurance, which they may not have.

Insurers could also extend existing components of homeowners insurance in a shared economy-specific clause or rider to supplement the commercial or umbrella policies offered by the home-rental company.

On the guest side, insurance companies can up-sell homeowners insurance contents coverage through personal umbrella policies to more adequately cover the cost of replacing or repairing lost or damaged belongings when staying in another person’s home, as well as to provide additional coverage for property damage for policyholders who are guests in another home.

Transportation

Car-sharing allows individuals with idle cars to rent their vehicles to people who need to borrow one, while ride-sharing allows individuals who may or may not own their own car to purchase a ride from another individual, similar to a taxi.

These shared services can put several parties at risk for covering a variety of injury, loss or damage costs: the owner of the vehicle, whether present or absent; the driver, whether owner or renter; and third parties such as passengers and other drivers.

While a vehicle is being rented, the car-sharing company’s insurance program typically is primary to the owner’s personal auto insurance policy but supplemental to a renter’s coverage. Certain coverage may be provided in only the minimum amount and only when required by a state (such as personal injury protection and uninsured or underinsured motorist coverage). None of the companies Aite Group examined provide protection for wear and tear or personal property.

Ride-sharing companies offer similar coverage.

A major gap in transportation coverage can be found in the timing of coverage applicability. A car- or ride-sharing company’s commercial insurance policy is active for the duration of the trip. For car-sharing, that means from the time the renter picks up the car until the car is returned; for ride-sharing, the trip duration is from the time a driver accepts a trip until the rider is dropped off, meaning the trip has ended.

But what about the times when ride-sharing drivers are waiting for rides and driving around with the ride-sharing mobile application turned on? Some ride-sharing services provide contingent liability for this gray area, while others do not. However, the contingent liability is secondary to the driver’s personal auto insurance policy, which may not cover damages if the driver is operating the vehicle for a fee.

Aite Group recommends that insurers consider modifying personal policies to adapt to the blurred lines of personal and commercial use of vehicles, such as adapting guaranteed asset protection (GAP) coverage to a personal auto policy rider, clause or umbrella coverage to include some instances of shared-economy car services.

Nonowner auto insurance could cover instances of individuals who participate in car-sharing but do not have their own auto insurance coverage. While many of the companies offer insurance coverage, the driver is responsible if coverage limits are exceeded. In states where insurance policies follow the vehicle, the car’s owner could also be liable if the other commercial or personal auto coverage is not enough.

Once again, a partnership between insurers and shared-economy companies could provide an additional distribution channel by directing consumers to purchase insurance coverage when setting up an account.