The sharing economy is here to stay in 2020 and was one of the fastest growing business trends of the last decade, although at this point in time it’s impossible to know the actual size of the sharing economy because many of the companies are private and don’t publish their full business results.

But to bring some focus on to value you only have to look at recent IPOs and the big players with their public valuations such as AirBNB, Upwork, Uber and the like.

So just what is the Sharing Economy? How does it look at the start of 2020?

In its simplest form it is swapping goods and services between two or more parties. This simple economic form has then been put on steroids by the inclusion of technology and cheap computing power. This new form of economic powerhouse will grow and evolve as both tech changes and more people have access to the internet globally.

Technology has allowed new forms of shared marketplace, collaborative platforms and peer-to-peer applications to be built. Today the ability to build a large global community has never been easier and the network of different communities and shared interests can power these new companies to success.

The sharing economy also has many other names and parts within its economic system such as Peer-to-Peer and Freelance/Gig workers and these terms are used interchangeably.

Technology has given these companies the ability to operate globally and vey efficiently. The companies are not loaded down with inventory and this helps these share-based businesses run lean. These efficiencies then allow these brands to pass-through value to their customers and their supply chain partners.

This is bringing challenges to existing industries and also their traditional support systems such as insurance. These support industries have lagged behind in the past decade but change is also coming faster to the whole network.

Transportation; Consumer Goods; Professional Services; Health Care these are the first of many areas where the sharing economy has affected their established business plans. Financial services, such as payment processes, are also being challenged to respond and new services are pouring into this once stable area which was controlled by the banks, no more.

Companies such as Uber, Ola, Lyft, eBay, Etsy, Rent the Runway, Fivrr, Upwork, People per Hour, Taskrabbit, Doctor on Demand all have million and billion dollar valuations and are growing fast. This was the result of the 2010 to 2019 decade….2020 onwards we will see these companies exploit their strong positions and changes in demographics.

What Is Next for the Sharing Economy in 2020?

More Technology and more disruption. But the difference will be that the sharing economy process will be assumed into the existing channels and the ways of doing business. Companies that don’t adapt will disappear and new ones will move into existing industries at a new faster pace.

The sharing economy is growing up fast, message is that the growth will reach or surpass PwC’s projections which show that five key sharing sectors — travel, car sharing, finance, staffing, and music and video streaming — have the potential to increase global revenues from roughly $15 billion in 2015 to around $335 billion by 2025. Massive growth.

Linked to this we are seeing companies going from start-up to unicorn in just a few years. This is unmatched in history.

What does this mean for the insurance industry? The sharing economy is breaking down the business model of insurance that is very well established. the new sharing economy is responsive, customer focused, data driven, short term, growth focused, multi relationship and tech based. Traditional insurance in nearly the polar opposite of this.

To be responsive and to meet the challenges for both the platform users and the providers there needs to be a new type of insurance company. One that is truly digital and built based on paying claims rather than processing policies. For insurance to be relevant to this new business model the digital insurer needs to be there when the claim is to be paid. This is trust.

Insurance is all about trust but somehow this has been eroded over the decades and lost in the depth of the contract small print and the layers of complexity. Customers need to know that the claim will be paid. The platform would need to know the claim would be paid. The digital insurer needs to understand how to deal with high-volume short-term policies and fast claims payment. If the insurer can do this then trust will be earned back. It’s all online, simple, clear, transparent processing of policies and claims.

GiG Work. As of 2014, 34% of the US Labor force, or between 54 and 68 million people, is comprised of independent workers. These workers are not all GiG workers but the numbers are growing an this is is being driven by the sharing economy and the gig economy.

GiG work is expected to grow to 40% by the year 2020 (Freelancer’s Union, 2014). On-demand platforms such as AirBnB, Uber, TaskRabbit, and Upwork have played an enormous role in growing the independent labor force. While platform workers currently account for only about 15% of the independent labor force (McKinsey Global Institute, 2016), the rise of the Sharing Economy platforms have significantly shifted mindsets about the nature of independent work, making supporting one’s self independently increasingly appealing and appear more feasible.

By empowering freelancers and other independent workers to connect with businesses and buyers of their services at a scale that has never before been possible, these platforms are inspiring an unprecedented number of workers to flee the constraints of the traditional workplaces in favor of more autonomy and flexibility in their work–in the process helping to create an entirely new kind of labor force, the Gig Economy. This is the driving force behind the sharing economy and with that the force that will re-shape the insurance industry.

Here at MIC Global we understand these forces and they are driving our company forward. We believe in the new economies and are building process, services and policies to fit into the new business models of today and the future.

The speed, reach and data that the new platforms operate on is driving change. Put simply, they get global fast and consume more data than traditional business. The insurance industry needs to respond equally to these challenges and build new products and services to meet these clients needs. The new type of insurer needs to be responsive, innovative and yet remain focused on underwriting the risk. Data is the key to this, however having the data is one thing successfully applying it to new insurance products is another. Having 1 million customers per day on hourly variable contracts is totally different to 1 million annual policies. The data velocity alone is a huge item to grasp.

Interested to know more? we have curated 3 great reports that are focused on the gig and sharing economy together with insurance. These reports are independent and cover the areas in depth.

Sharing economy insurance report AXA XL

Sharing economy business report PwC

Gig economy insurance report Cake & Arrow

At MIC Global we are focused on changing the way business insurance is developed and processed. We are digital insurance. We are in the forefront of change; developing policies by the season, job, by the hour, by the day and by the Km, thus fitting our model to that of the platforms and the way small and micro businesses see risk. We are unbundling business policies so that the cover offered fits with peoples and business needs or the actual job or process being undertaken. Making Business Insurance transactional and available.

In and around 1995 the term e-commerce was being used extensively to describe the new emerging electronic or digital or online business as it was then, carving our a difference between ‘normal’ and ‘new’ commerce economy. Now, arguably, it’s just commerce, business is now done digitally – it’s business as normal. It has taken 20 or so years to transform and invent large swaths of business on to and through e-commerce and digital platforms, business is now online e-commerce is not just commerce.

Today we are not just talking of changing business we are now changing the whole Economy (the complete wealth and resources of a country, especially in terms of the production and consumption of goods and services). The sharing economy and gig economy are starting to define this change, peer2peer services and platform businesses. These terms are often confused but essentially they are similar when thinking of the road map of change to the economy – we will use the Sharing Economy to cover this emerging and new digital drive, asking the question ‘when will the sharing economy become The Economy?’

The sharing economy is still only a small part of the overall economy. However more and more it is increasingly becoming seen as simply part of “the economy” and this points to the ultimate sign of the sharing economy’s success and progress into the general way companies and businesses think about how to set-up, change and grow.

Here are 4 big trends for the sharing economy in 2019 from the World Economic Forum

2019 will see the first sharing economy IPOs. Lyft and Uber have filed to go public, Uber is valued at $120bn and Lyft at $15bn. Just as in 1997 Amazon went public, this is the first signs of acceptance. Although, as we have seen with Amazon, there are many ups and downs!

There are issues to be addressed as the changes to work practices ripple though the economy. Do we focus on responsible business, do we allow the workforce to choose? Or do we leverage the opportunities in platform power? Do we arrest the power from the platforms or do we allow platforms to pressure their workforce through the app?

Many institutions and the society at large still focus on defining people by one job and a career, whereas the sharing economy encourage many income streams and jobs with all the inbuilt flexibility for the person, making defining the person difficult today for banks and others. Changes to ownership and work structures that reflect the reality of today’s workforce, particularly in the people driven gig economy, are much-needed to address how the wealth distributed.

There is much discussion over exploitation of the worker, but this needs to be thought of differently as more technology moves in offices and factories, through blue-collar and white-collar jobs. People need to think of the all the opportunities. Companies (platforms) must be encouraged to distribute the ability to create wealth though platforms, not just exploit the worker and drive their income down as competition grows.

Think of a family who generates its power through solar and wind, storing and selling excess. They have 1 or 2 autonomous vehicles that they use and when not in use are sent to the grid to earn income. The children do dog walking via an app and care for an elderly friend giving social visits. They grow their own food in vertical gardens, again selling the excess locally when it’s available. The adults earn income by bidding for different projects that take a day or a few weeks to complete. Their main interest is music and they write their own and sell access to it building up a good following. The family profile is closely held and the data and metrics are managed, being sold as their own income to large corporations, advertising agencies and universities to complete research. This is not exploitation, this is a new way of ‘working’ or living.

The rush to scale the sharing economy in some parts of the world is unprecedented. In China, the government wants it to account for 10% of national GDP by 2020, a huge change and one that we have seen many times China complete in the past 30 years. Governments need to provide leadership.

The much vaunted PWC study and projections from 2014 points to large growth and many of its predictions are coming true as we see likes of AirBnB and its many spinoffs create value for home owners, seeing a huge change in availability. Scooters, Cycles and soon autonomous vehicles will all add to this shifting business model.

Whether 2019 portends more growth or difficulty for the sharing economy depends, but one thing is coming true faster than that of e-commerce taking off, the sharing economy is fast becoming just the economy.

Technology is powering the change and the ability for people to participate in this new economy and to switch from providing just a boost to their income, through letting a room, to becoming the way they earn all their income through a portfolio of work and investments that operate through several platforms.

This brings us to insurance and how insurance will change to reflect this new economy. Sharing economy insurance will become more responsive and event based – microinsurance policies will be used to provide insurance cover for events and processes. Today we see changes coming through innovative new insurance companies, but none so fast as in China where they recently posted 1.1 Billion policies in one day!

So maybe we are closer than you think to the sharing economy being The Economy.

Insurance is often portrayed as complicated, expensive, boring, no choice (don’t want), unresponsive, poor service, the list goes on. Even as adverts trying to sell on the TV, when insurers have full control of the message, the message often turns to humour without actually explain what the product is really all about.

Not surprising then that consumers and businesses see insurance only as poor value and a necessary evil.

In this blog I want to start to change that view. Let’s think a bit about the real benefits of insurance. What does it enable? What benefits does it bring?

To re-write the Life of Brian sketch about the Romans….. What has insurance done for us? Well World Trade; General Mobility through vehicles & aeroplanes; Health, Security of loans and homes… OK, OK, OK, so apart from World Trade, Mobility, Health, Security – what else? ………… Nothing!

So why is it that insurance seems so irrelevant when so often it is the enabler?

At MIC Global we believe that insurance needs to change and become embedded into the lives of everyone – less bulk purchased every year; more use on-demand, embedded into the process or activity we are doing or item we are using at the time. Mapping against the new economy and new platform businesses.

However, this belief is hard to put into practice. Where do you get capacity? How do you pursued an insurance company to re-write their policy? How to you build in the insurance into a new business plan that is already under pressure?

Today’s new economy, sharing economy, entrants are can only seem to ‘self-insure’ and in doing so just ignore the risk to the platform users, they promote the new process as good thing but don’t say your home could be at risk if you use the service or you could lose your dress or handbag though customer theft.

To over come this and to bring some much-needed sense into the pricing and program process we are launching MIC Global. We believe that this will be enable us to offer new insurance programs for the sharing economy and new platform businesses.

The aim is to use technology as much as possible to streamline the insurance process. Not just on the purchasing side, including claims processing and automation. Straight through processing is the aim. Integrating our tech with our client’s tech to produce a seamless approach to insurance.

We are focused on the property sharing economy insurance, we see this as a great place to start and have pricing that starts for just one night and can include trip cancelation. This allows the Host to plan their income with some certainty and know that any small thing that happens to the property is covered.

When I start to think about designing a new insurance product I always like to start with the questions why do people need it? and who is it for? Building a picture of the business, person or family helps.

Insurance is a product designed to help in time of need. At its heart there is a product that should lift you up and support you. You should buy insurance to help you make those difficult decisions in life.

We have new ways of working and we need new insurance – sharing economy insurance for example. Who wants sharing economy insurance?

I do know that people don’t always think this way – insurance for most people is something that you must buy – for the car, the office, a contract or for a loan or when you go on a trip. Plus, when the policy is called upon, the insurance industry suddenly sufferers from poor customer service, just when you need it the process fails. Finally we must not forget that, for many people around the world, insurance is simply not available. These people must manage their risks without the safety net of insurance.

So, today, it was great to find a web site that is global and shows what people care about and what their dreams are. The website is called Dollar Street and created by Factfulness co-author Anna Rosling Rönnlund.

Dollar Street imagines a world where everyone lives on the same street and the houses are ordered by income. The poorest live on one end, and the richest live on the other end.

It is hard to imagine the people buying your products and what their circumstances are and in product design this is essential. This web site is great for me, now I can see and imagine how insurance can help and support these people. I can see the similarities.

Having spent time on Dollar Street, the similarities become clear. People all need the same things, as their wealth increases the same things come up in the pictures, from Brundi to Sweden. At the end of the day, we all want shelter, food, and better tools to take care of ourselves.

There is no single future of work. The only more certain thing is that all work will change, hours, terms, tools, colleagues, coffee and hopefully the commute.

Today all the buzz is about Uber, Upwork, AirBnB and anything with a blockchain or is sharing something. In my earlier life I worked for Microsoft and when I told people who I worked for, they had never heard of it, yet we all believed we were changing the world just like the millennials of today. The big difference is the buzz around the importance of technology and the changing work place.

A recent report from Australia focuses on Uber’s rapid growth as it becomes the cheerleader for the growth in the freelancer or gig economy. This new economy is being touted as giving people all the flexibility they want with the ability to work. The freelancer economy is where people perform work on an irregular, on-demand basis, paid by the task, and without the stability or security of traditional paid employment.

As this model has grown globally and especially in the conservative labour law based western economies, the freelancer model is raising concerns about the erosion of labour standards, minimum wages, paid leave, wait time, maternity and other benefits.

The report uses simulations and shows that typical Uber drivers earn much less than would be required under relevant minimum wage standards in Australia.

The report highlights that the headline rates are soon cut down by all the deductions bringing the overall income levels down. This is the problem with many of the freelancer and sharing economy jobs, however the flip side of the value, flexibility, is often not added back. The fact that people can and do have more than one stream of income allows overall a very flexible way to build up good income levels. However the report shows that these workers end up earning less than the minimum wage of a country and states that this is a ‘subsidy’ and this has allowed for Uber and other companies, rapid expansion.

The arguments miss the benefits of what these companies have brought and the technology has enabled. From the best education being available to ‘anyone’ (internet being available) in the world to enabling a new arrival in a strange new city being able to actually get a job that starts them on an employment journey.

These benefits will become more critical, especially in the countries where there is a growing number of people entering the workforce at the same time as when automation is becoming a stark reality.

Approximately 300 million people will be entering the workforce in the next 10 years, a third of those from India. This requires not only skills acquisition but in a form of experiential learning which makes those skills applicable on the job from day 1.

The ability to find and build income through new platforms, have access to build new skills and to grow skills are all key to building a new partnership with technology, allowing individuals to have flexible work patterns – which leads us to the growth of an open relationship between universities, technology and industry partners. The future of work is flexible, adaptable and changing.

As companies grow, their risk management programs generally evolve with them and the insurance industry has gotten used to working each year (once a year) to update the plan or add new features. Companies used to grow at a certain rate and their insurance programme evolved along the same pace. For traditional industries, it can take years to move from one structure to the next. This works very well for the insurance industry which is the quintessentially traditional industry.

Skip forward to now, today. Companies operating in the new world of the sharing economy and gig economies – the tech lead platform businesses, where assets or services are provided by one side of the platform and the clients clamour to use them on the other side – growth rates can be high, extraordinarily high for a few companies. Suddenly this scenario is very different for the insurance industry. They want Sharing Economy Insurance. Insurance built for the sharing economy.

For the companies operating in the new sharing economy, their risk profile evolution happens at a much faster rate. Because of this many of the risks they face are new exposures that are unfamiliar to the commercial insurance market. Not new as such, but upside down or put on their side. The ‘traditional insurance’ companies and markets can’t seem to grasp the sameness, they only look at the differences.

The result of this is that these sharing economy companies tend to be faced with markets that find them less understood and especially as they expand quickly, leaving the insurer capacity limited, meaning that the pricing may be higher and restrictive.

The upshot is that the programs are hard to place and then can be short lived as the costs push them quickly towards being ‘self-insured’.

Are their alternatives?

Captives, a useful insurance vehicle, can provide sharing economy companies with an alternative and many benefits, these are the reasons why companies form captives:

• Insure otherwise uninsurable risks
• Control your insurance costs
• Gain more control over cash flow and budgeting
• Self-insure your co-pays
• Adjudicate and control claims
• Retain investment income
• Control the investment of the net premium
• Manage unpredictability of future losses
• Reduce unpredictability of uninsured losses charged to earnings
• Create a strategic advantage in negotiating with insurance companies
• Generate underwriting income
• Generate investment income

With the ability to gather significant amounts of data with ease, firms with sharing economy models are prime candidates to support and operate alternative risk structures to solve their unique insurance needs.

In today’s world, where companies start and then want to grow nationally, internationally and then globally all in a fraction of the time it used to take, companies need access to new types of partners to support this fast paced growth. For a traditional hotel chain, such as Hilton, the cost of this fast-paced growth would take billions in building investment, for the new economy, the sharing economy world, what you need is great staff, an app and a movement.

This development is by no means simple. It takes an investments of a different kinds, but it is less restrictive in terms of state and country boarders, plus it can be much much faster. It’s one of the reasons why the hotel chains failed to take on Airbnb. These new companies need new thinking and older companies just don’t have it within their ranks.

You would never had gone to the radio companies in the past to produce your television programmes. It takes new people with different skills.

The other dilemma for these new sharing economy companies is access to global partnerships. New types of partners to help and support these new economy companies. Finding companies that have global ambitions and technology that the platform businesses can plug into to support their own growth in areas such as trust through insurance for example.

Insurance is typically poor at technology, marketing and dealing with global issues. Their compliance, whilst very protective, also slows the industry down. It can be very hard to put a global insurance program together based on new areas of risk or a new way of looking at the risk.

On the technology front, brokers and, in many cases, insurers have poor technology infrastructure, relying on local and regional portals that are not capable of scaling to cover volume business internationally. Claims are outsourced to third parties and they have little interest in the data analytics of the business, particularly when focused on continual process improvements.

What is the answer to finding partners? It is to look very carefully before committing, particularly to insurance partners. Companies can quickly have a patchwork of different insurance offerings and be stuck with only partial cover. Companies need to decide if they want to invest in tech to make it efficient and have a team managing the insurance placements, this is all none core business investment.

The global brokers and insurance companies are not always the answer. They have limited resources to put on to this, particularly when it comes to machine learning (ML) and artificial intelligence (AI) technology. They have little to knowledge of platforms and what sets these businesses apart from their normal ‘annual’ traditional core placement businesses.

The partner of choice should have a global capability, access to local knowledge, be investing in ML & AI for partner solutions and have a keen interest and knowledge of the shared, gig, freelance economies.

Take care, look before you leap.