PCI Testifies on the Sharing Economy and Offers Solutions

WASHINGTON – Robert Passmore, assistant vice president, personal lines at the Property Casualty Insurers Association of America (PCI) testified today before the House Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade on the hearing entitled “The Disrupter Series: How the Sharing Economy Creates Jobs, Benefits Consumers, and Raises Policy Questions.”

“PCI members are at the heart of the sharing economy, creating and providing new solutions for businesses and consumers to protect their personal and financial safety,” said Passmore. “While innovators in the sharing economy have designed new ways of using technology to improve business models, insurers have been innovating new ways of providing protection for centuries and similarly will be the grease that will enable the sharing economy to reach its potential.”

The sharing economy is typically not new commercial activity, but rather is a new business model with enormous potential that allows individuals to use their personal time and resources to engage in commercial activity with the potential to provide for more efficient use of resources for society, while essentially creating millions of single person businesses.

“Insurers are interested in understanding the answers to the larger policy questions, but of primary concern for insurers are the critical insurance issues raised, as these business models blur the line between what has traditionally been thought of as commercial or personal exposure,” continued Passmore.

A prominent example of this dynamic has been evident in the emergence of ride sharing or transportation network companies (TNCs) that initially had their drivers rely on their personal auto policies for coverage, with the companies themselves providing some coverage that applied if the drivers coverage was exhausted.

“The good news is that the TNCs and insurers have been able to reach consensus on a model law that supports the sharing economy business model while providing appropriate insurance protection as well as disclosures that protect drivers, consumers, and insurers,” said Passmore.

“Over the last year it has become clear that, while there are significant insurance challenges presented by sharing economy business models, solutions can be found by following a few principles:

  • Market based approaches are preferred for both sharing business models and insurance, but in some cases state laws may need to be clarified to protect predictable interpretation of insurance policy language and contract certainty.
  • Awareness of insurance issues is essential; sharing economy contractors need to have a clear understanding, from proactive disclosure by the sharing business, of what the insurance issues are, what coverage the sharing business is providing and what additional coverage the contractor may need to obtain prior participation.
  • State laws and regulations need to allow flexible insurance solutions: the sharing economy business model creates opportunities for both commercial and personal lines insurance products. The excess and surplus lines insurance market is where many new business models find coverage and those avenues need to be open to the sharing economy business model as well.

“PCI’s mission is to promote and protect a competitive insurance market for the benefit of consumers and insurers. Our members are committed to developing and providing new insurance products to support commercial and consumer innovation such as the sharing economy. We appreciate that Congress has taken an interest in these issues and look forward to continuing to work on sharing economy insurance issues in the future,” concluded Passmore.

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PCI is composed of nearly 1,000 member companies, representing the broadest cross section of insurers of any national trade association. PCI members write $216 billion in annual premium, 36 percent of the nation's property casualty insurance. Member companies write 43 percent of the U.S. automobile insurance market, 29 percent of the homeowners market, 34 percent of the commercial property and liability market and 36 percent of the private workers compensation market.

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Awareness of insurance issues is essential; sharing economy contractors need to have a clear understanding of what the insurance issues are
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State laws and regulations need to allow flexible insurance solutions: the sharing economy business model creates opportunities
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Insurers are interested in understanding the answers to the larger policy questions, but of primary concern for insurers are the critical insurance issues raised, as these business models blur the line between what has traditionally been thought of as commercial or personal exposure
Robert Passmore