New Insurance for the New Consumer

Our 21st century world is changing rapidly, so it’s no surprise that the insurance industry is evolving with it. As the modern individual faces new and unique challenges, carriers have to adapt to meet the coverage needs of a fast-paced world. Below are a few examples of new types of coverage for life in the modern world.

1.) Tiny Home Insurance

While today’s marketing and social media constantly feed users the message that they deserve more and bigger, a movement has sprung up of people who want to downsize their lives–and their homes. The tiny home trend embraces a simple lifestyle that focuses on conserving space and resources, and keeping only what is essential for day-to-day life. Some tiny-home owners tout the benefits of living in a way that’s more environmentally sustainable. Others prefer the perks of low-cost living that allow them to get free of debt. Either way, tiny home dwellers find freedom in this minimal lifestyle.

These homes tend to be 400 square feet or smaller. While some are stationary, others are built on wheels and can be easily moved to new locations. Because homes of this size often do not meet building codes for residential areas, and because some are legally classified as RVs, many traditional insurers are hesitant to provide coverage for these dwellings. This has understandably been a struggle for tiny-home owners. To bridge the gap, carriers around the country have begun tailoring coverage specifically for tiny homes. Their reasonable premiums fit perfectly into the owners’ frugal lifestyles. So tiny home insurance can help tiny home dwellers sleep peacefully at night, knowing that their pint-sized paradise is protected.

2.) Reputation Insurance

The convenience of social media carries with it some unique challenges. While your agency can share to-the-minute updates with followers and interact freely with the public via social media platforms, that also carries liability. Increased communication and exposure comes with increased risk to a company’s reputation. So what can a business do to mitigate that risk?

 

That’s where reputation insurance comes in. Some carriers have begun offering coverage to help businesses protect themselves from threats to their reputation. This comes in a couple varieties: Coverage for public attacks against a company, and also coverage for information breaches about internal acts or events that the company feels could be damaging/seen as a breach of trust by the company’s shareholders. These policies can cover everything from lost revenue to the cost of hiring crisis management consultants. In a world where anyone can say anything online, businesses are preparing themselves for any contingency.

3.) Short-Term Rental Insurance

The rise of Airbnb has been a boon for vacationers and homeowners alike. It gives travelers an alternative to expensive hotels, while also giving homeowners a chance to earn a little extra money. But naturally, there is risk involved. Perhaps you’ve heard the horror stories of people returning to their homes to find them trashed or looted by Airbnb guests. While not common, it has happened. And because damages occur while the home is being used for commercial purposes, most homeowners policies will not pay in these cases. What is an Airbnb host to do?

Airbnb itself has responded to this risk by offering Host Protection Insurance at no additional charge. This coverage protects the homeowner for damages up to $1 million. But is it enough? Some experts say that Airbnb ‘s policy leaves hosts with too little protection to justify the risk. Perhaps we’ll soon see independent carriers specializing in comprehensive coverage for Airbnb hosts, so you’ll have peace-of-mind when handing over your house key.

4.) Ridesharing Insurance

On the subject of making money on the side, ridesharing with companies like Lyft and Uber is becoming increasingly popular for those who own a car and need some extra cash. Some drivers even use it as their principal source of income. Unfortunately, ridesharing falls into a sort of gray area when it comes to insurance. Personal auto insurance won’t cover accidents that occur while driving for a ridesharing service, and commercial auto insurance isn’t feasible for many who rideshare casually in their spare time.

Fortunately, many major carriers have taken up the challenge and started offering coverage specifically for Uber and Lyft drivers. This makes it a little easier for car owners to justify using their personal vehicles to make some extra money. If you’re considering becoming a driver for one of these services, it’s certainly worth doing a little research to learn if ridesharing insurance is available in your state.

5.) P2P Insurance

Innovation in the insurance industry isn’t always about finding new ideas–sometimes it’s about giving new life to old ones. That’s the idea behind the growing trend of P2P insurance, which seeks to lower costs by forming insurance pools. This hearkens back to the very first incarnations of insurance, in which merchants pooled their risk for shipping goods. In this model, rather than paying a company to assume the risk of a disaster, policyholders pay into a pool that pays out when one of them has a claim. The fewer claims there are, the lower the costs are for everyone in the pool. For many, this makes P2P insurance a budget-friendly alternative to traditional insurance.

P2P insurance is another consumer alternative popping up in the increasingly-popular “sharing economy,” which includes services like Airbnb and Uber. It leverages social pressure to keep costs low. “If the costs for everyone else in the group depend in part on my behavior, the group has an incentive to encourage me to act in a way that reduces the likelihood that any of us have a claim,” says Harvard professor Brigitte Madrian. This also benefits the companies offering the service, in the form of built-in fraud deterrent–a person is less likely to commit insurance fraud when they know that the fraud would directly harm them.

Though P2P insurance has gained more of a foothold in Europe than in the U.S., local companies have begun offering this type of coverage in select areas. What do you think of this business model?

As our world continues to grow and change, so will the insurance industry. We’re certainly curious to see what new types of coverage will pop up in the coming decades. After all, rising to meet the challenges of an ever-shifting economy is what insurance carriers have done for hundreds of years.

–by Mallory DuPuy

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