The world of property/casualty insurance long has been divided into two separate and entirely circumscribed hemispheres: the personal and the commercial. Personal lines policies – primarily home and auto insurance, but also coverage for renters, motorcycles and boats – are largely standardized, sold directly or through agents and, in many states, are subject to strict regulation of rates and forms. By contrast, commercial lines policies – directors and officers, general liability, commercial auto, inland marine – are bespoke to individual firms’ needs, sold through brokers and, as business-to-business transactions entered into by presumably competent parties, are largely unregulated (with the notable exception of workers’ compensation).
However, a new range of services made possible by improved communications technology and ubiquitous smart phone applications are beginning to blur these once-clear lines of demarcation. These peer-to-peer markets connect potential buyers and sellers in ways that were not previously possible. Largely by offering convenient pricing, payment, marketing and screening services, these match-makers make it possible for many heretofore amateur providers to deploy their capital and labor in productive ways.
Each of these new services presents potential risks to property or creates potential liabilities for those who opt to use them, either as consumers or producers. Three specific areas of the peer-production economy – ride-sharing, car-sharing and space-sharing – have offered some of the thorniest coverage questions for personal lines insurers, for regulators and for the general public. As a growing number of private individuals look to earn ancillary income streams by renting out rooms or entire properties, by renting out their cars or by providing ad hoc livery and limousine services, what are the consequences for the home and auto insurance markets? Do personal lines policies offer liability coverage when amateurs turn professional? Who should provide coverage – the peer production service, or the individual drivers and renters? And what thresholds should be set for when and how much coverage must be obtained to ensure that consumers are appropriately protected?
The future of these services depends crucially on finding answers to these and other questions. This paper looks to explore some of the pressing insurance issues within one specific subset of the peer production economy – ride-sharing – and will conclude with some broad recommendations about ways both regulators and market participants could address those issues in the months and years ahead.