The Implications of Home-Sharing

The industry needs to adapt because hosts and travelers alike face unexpected exposures because of the surge in home-sharing.

You don’t have to look hard to find a wealth of headlines about the latest trend in travel.
  • "Home sharing has real benefits for retirees" - MarketWatch - Oct. 17, 2016
  • "New study claims Airbnb is good for Vancouver’s economy" - Global News - Nov. 1, 2016
  • "Airbnb boosts rural Irish economy by €74m in the last year" - Irish Mirror - Nov. 4, 2016
  • "Business travelers will be hit hardest by the crackdown on Airbnb" - Economist - Nov. 4, 2016
And the list goes on. For some, home-sharing is the best thing since sliced bread. For others, it’s a slippery slope to chaos and anarchy. I suppose it depends on which side of the dollar sign you are on. For those opposed to this new form of economic exchange, it's time to get real. Whether we like it or not, home-sharing is here to stay. How we as an industry react to it is a different story. As insurance professionals, we should be on the right side of this massive shift. After all, it's changing how people earn money from the largest (insured!) asset they own. Home-Sharing: a Primer Home-sharing has seen massive growth in the last few years, specifically among millennials. A survey on the travel site HipMunk found that "74% of millennials have stayed at a vacation rental (such as those available through Airbnb),” compared with only 38% of Gen Xers and 20% of Baby Boomers. The popularity of home-sharing is undeniable. Airbnb has welcomed more than 60 million guests since its founding in 2008 and is available in more than 34,000 cities across the globe. Also, did you know that Starwood-Marriott, the world's largest hotel operator, owns about 1.1 million hotel rooms? Airbnb, on the other hand, has more than 2 million listings. So, consider that in eight short years, Airbnb now has more rooms than the largest hotel chain. See also: Huge Change in Home Insurance   Oh, and keep in mind that Airbnb owns zero of those 2 million properties. Why Is Home-Sharing So Popular? There are some enticing benefits to home-sharing, both to the homeowners who rent out their homes and to the travelers themselves.
  • Homeowners can transform unused spaces in their homes into assets that create alternative income streams.
  • Travelers can enjoy inexpensive, convenient and local experiences.
  • Travelers who prefer non-traditional holiday destinations can access well-equipped accommodations in unusual locations.
Home-sharing has taken the tourism world by storm in the last few years, and there are many in the industry who are shaking their heads in shock and disbelief. Companies such as Airbnb, HomeAway and Vacation Rentals By Owner (VRBO) are but a few of the big names in this growing industry. These platforms allow homeowners to monetize their property and rent it out to users of these platforms for a predetermined fee. No more classified ads! Airbnb Is Taking the Hospitality Industry by Storm Currently valued at $30 billion, Airbnb is commanding the attention of the global market, with annual revenue expected to reach $900 million this year. It’s no wonder the company captured the No. 2 position on the CNVC Disruptor 50 List in 2016. According to Beyond Pricing, a pricing service that assists hosts in pricing their listings, Airbnb is seeing exponential growth in the U.S. (with the greatest increase occurring in cities such as New York, up 38%, and Los Angeles, up 32%). Airbnb has also seen incredible growth in Europe and Asia, with the fastest-growing cities being Osaka, Beijing and Tokyo. The home-sharing industry has radically disrupted the $100 billion global vacation rental industry, an industry that Research and Markets analysts are predicting will reach the $170 billion mark by 2019. It’s no wonder that the hospitality industry is sitting up and taking notice. And so they should…as should other industries, such as insurance carriers, because we will be greatly affected by this change in policyholder behavior. Home-Sharers Need Specialized Insurance Coverage Allstate was the first major insurer to broach the subject of home-sharing, offering personal property protection tailored to home-sharing clients. Traditional homeowner policies don’t cover the risks that owners face when they rent out their properties on a short-term basis. Yes, many of these platforms have built-in insurance policies, but there are clearly gaps in coverage. Risks to short-term rental homeowners include:
  • Damage to home/property (both the owner’s and neighbor’s properties).
  • Property theft (there have been reports of owners returning to their property to find jewelry, valuables or electronics stolen).
  • Identity theft: There have also been cases of hosts returning home to find passports, birth certificates or laptops stolen.
  • Personal injury to third parties in the home.
Allstate has called its new product HostAdvantage, and it can be added to the homeowners existing policy for about $50 a year. Allstate currently offers this "top-up program" in Arizona, Colorado, Illinois, Michigan, Tennessee and Utah and is expected to make it available in more states by next year. Don't Forget About Travelers! Not only is there a gap in the market when it comes to homeowners insurance, but there is also an opportunity to create unique travel insurance packages for those who use this new mode of vacationing. Travelers also face unique risks in the home-sharing industry:
  • Damage to persons or property.
  • Loss of valuables due to flood or fire in rented homes.
  • Injury due to items in the home.
  • Last-minute cancellation by homeowners.
  • Serious hazards such as staying in a home without a carbon monoxide detector, without a first aid kit or with safety issues created because the building is not up to code.
Home-sharing platforms do not physically inspect properties to ensure they are safe. This is something we at WeGoLook are trying to change with on-demand inspections, but that's a story for another day. Insurance carriers of all sizes should anticipate the needs of clients who require additional insurance products suitable for unique home-sharing situations. See also: Sharing Economy: The Concept of Trust   Rather than waiting to play catch-up, astute insurance carriers will adapt insurance packages for home-sharing participants on both sides of the equation: hosts and travelers. Now, I realize that we’ve only touched the tip of the home-sharing iceberg and its impact on the insurance industry. This topic could easily be a 100-page white paper. However, I trust that we’ve also provided you with food for thought toward developing strategies for enhanced homeowners and traveler insurance policies. Home-sharing is here to stay, and this is a good thing! Traditional industries simply need to adapt and accept, rather than kick and scream (think taxi industry and Uber). I trust we all fall into the former category.

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