Sharing and Cyber for Small Biz Risks

If you write policies for small businesses, there are two big stories for 2015 that you should be tracking: the trajectory of the so-called “sharing economy” and the rise of cyber liability. In 2015, these two forces will have a significant impact on how we contemplate risk for small-business clients. They’re also closely linked.

Let’s start with some definitions. The “sharing economy” is what analysts are calling the phenomenon of people sharing their personal resources for money, usually with the assistance of technology. It’s also been called the “freelance economy.” Think ride-booking services like Uber and Lyft, home-sharing networks like Airbnb, and errand networks like TaskRabbit.

These networks took off during the recession. Today, there’s still a demand for the freelance economy’s benefits — convenience on part of consumers and a flexible part-time income for workers.

As an insurance professional, you see the problem right away: while a digital network of independent workers may be a convenient way to let people pay each other to do work, it also introduces an incredibly complex system of liability. The large corporate startups can cover themselves — but among the individual freelancers, many don’t even realize they have exposure.

Increasingly, insurance providers are beginning to recognize this liability — or, more to the point, they’re beginning to accept that this liability isn’t going away. Some auto insurance providers made it official policy to deny personal coverage to clients who moonlight as rideshare drivers. On the other end of the spectrum, some providers are developing products specifically for the hybrid personal/commercial risks faced by these “sharers” — who are, from a legal perspective, owners of very small businesses.

The bottom line for agents is twofold:

1. When writing personal lines, it’s now essential to ask about commercial activities.

2. When looking to expand a small-business book, it’s time to recognize the opportunity presented by independent contractors who may not realize they need commercial coverage. To identify these clients, ask whether they receive any 1099 tax forms.

Of course, the whole sharing economy is highly dependent on the technology that powers it. This brings me to the second big story of 2015.

The Steady Rise of Cyber Exposures

It’s no longer news to announce that small businesses need cyber liability insurance. What remains uncertain, though, is how we handle that need. If, for example, you’re writing a commercial auto policy for someone who offers rideshare services, do you need to think about cyber insurance? What would happen, for example, if that person used a no-longer-supported Android phone and accidentally downloaded a virus that stole data from every passenger the driver drove for, say, six months?

It’s possible: rideshare companies tend to have vehicle safety requirements but none for users’ phones.

The truth about cyber liability is that it’s largely uncharted territory. And one of the biggest problems with cyber exposures is that most of us don’t understand them. If you’re an insurance agent, part of your job involves explaining to your customers why they need essential coverage. But could you explain what two-factor authentication is or how to recognize spear phishing?

Cyber risks aren’t going away, and the trend toward an economy of freelancers is only accelerating, which means the “sharing economy” will stick around. If you’re part of a small P/C agency, now is the time to start self-educating about cyber risks. This knowledge will also help you capitalize on the market of more of the 53 million Americans currently making a living from independent work.