Insurance Implications of the Sharing Economy

As a growing avenue of added income, many property owners are renting out their homes to locals and foreigners over the holiday season or working as an Uber driver in their personal vehicle in what is coined as the ‘sharing economy’, with platforms such as Airbnb, Houseswop and local variants such as Wheretostaymaking it easy. 

Most property and vehicle owners are however blissfully unaware that they could open themselves to significant liability and damage risks if their insurance covers are not correctly scoped for the commercial realities of this sharing economy.

“While the prospect of making some extra cash by letting out your property this holiday season or delivering food as an Uber Eats driver is very appealing, it is advisable to do so from an informed perspective to prevent unexpected losses that could far exceed any profits made,” says Mandy Barrett of insurance brokerage and risk advisors, Aon South Africa.

Aon points out a few aspects to consider:

• If there are no signs of forcible or violent entry, the loss of stolen or damaged goods is generally not covered.  So, if your tenants make off with your 72-inch TV, chances are there won’t be cover in place as the nature of risk is now a commercial one which is not covered by a personal insurance policy.
• If you have a clause in your insurance policy that requires an alarm system to be activated, you could be at risk if your paying guests did not set the alarm before leaving the house.
• You are generally liable for any injury or the death of guests that enter your property or your vehicle. But as soon as you utilise either of these as an income platform, the liability aspect shifts, and you will require commercial liability risk.
• If there is an incident of a criminal nature, the personal belongings of your paying patrons will not be covered.

“There is a distinct difference between living in your home for your personal usage and renting it out to paying patrons, likewise if you are driving your vehicle for personal usage versus earning an extra income as an Uber driver.  Your personal home and motor insurance will normally not respond to a claim in both these instances,” explains Mandy.

“It is highly advisable to seek the advice of a professional insurance broker to protect against loss and liability when renting out or driving around for remuneration or a fee. While many platforms such as Airbnb and Uber offer limited insurance cover for its property and vehicle owners, it is crucial to declare the changed risk to your insurance broker to avoid an instance where a claim is repudiated on the grounds of non-disclosure,” she adds. 

Some insurance providers are able to offer cover to bed and breakfasts (B&B) through a personal lines policy, under conditions and set limits pertaining to:

• The number of rooms that are used for paying guests.
• Loss or damage of personal effects of paying guests.
• Trauma compensation for paying guests of the B&B.
• Loss or damage to external signs, blinds and canopies.
• Loss or damage due to cleaning and dry-cleaning of guests’ property.

“It would be beneficial to consider a commercial bed and breakfast policy which caters for the above, in addition to extra public liability and other essential insurance covers that are not included in a personal lines policy,” says Mandy.

“On the motoring side, it is imperative to stipulate to your insurance that you are using your private vehicle for business, as is the case when you drive for Uber. It fundamentally changes the risk associated with the use of the vehicle and it may well be worth looking into commercial vehicle cover that is geared for it, especially since your liability changes significantly in a commercial setting,” Mandy explains.

“The last thing you want is the cost of letting out your holiday home or using your car to accommodate paying patrons to outweigh the benefits of doing so.  Consult your broker to properly scope your household and motor insurance covers and be informed of the possible risks that you may face and how to mitigate them,” concludes Mandy.