The Sharing Economy: Ride and Home Sharing

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2 The Sharing Economy: Ride and Home Sharing Kelly Campbell, Property Casualty Association of America Tony Canas, MBA, CPCU, AU, American Modern Insurance Group, Munich Re Jeff De Turris, CPCU, Insurance Services Offices, Inc(ISO) Brian J. Gerritsen, CPCU, ARM, Travelers Leah Heller, Rockhill Insurance David Hurt, CPCU, General Reinsurance (GenRe)

3 The Sharing Economy Ridesharing and Home Sharing Panel Presentation Kelly Campbell Vice President of Property Casualty Insurers Association of America (9 years) Bachelor of Science in Economics from Regis University Antonio Canas, CPCU, AU, AIC, ARM, ARe, ASLI, API, AIS, AINS Territory Sales Manager for American Modern Insurance Designations MBA from Iowa State University BS in Management Information Systems Jeff DeTurris, CPCU Vice President of Coverage Products and Shared Services at ISO (34 years) Responsible for the rules and forms product development and maintenance for personal auto, homeowners, commercial auto, farm and business-owners Brian Gerritsen, CPCU, ARM Managing Director Excess Casualty at Travelers Global Practice Group Leader for MidCorp Casualty at Allianz Global Corporate and Specialty Leah Heller, CPCU Director, Specialty Excess and Umbrella, at Rockhill Insurance Services David Hurt, CPCU, MBA Claims Executive and Second Vice President for GenRe (11 years) Reinsurance Claim Executive specializing in casualty and workers compensation claim audits, corporate claim operation evaluations, prospective client claim evaluations and catastrophic claim consultations

4 What s It About? Personal Lines Policyholder and Insurer Coverage Issues and Solutions Corporate Risk Management Employees and Independent Contractors TNCs and Home Shares Claims Ramifications and Pending Litigation Commercial Coverage Exposures and Coverage Gaps

5 Who s It For? Objective #1 After attending this session, participants will be able to understand the claims, legislative and coverage issues with ridesharing and home sharing. Objective #2 Participants should be equipped with solutions and coverage options for their insurance companies business as well as personal needs in regard to ridesharing and home sharing. Objective #3 Participants should be aware of the legislative process and how they may become involved in their state regulations for ridesharing. Objective #4 Participants will gain awareness of the characteristics of the ridesharing/home sharing market and how our personal lines industry can both manage its risk and capture new business through innovative solutions.

6 Introduction Transportation network companies (TNCs) are quickly emerging in the United States as ridesharing is now available in more than 250 cities, and Uber s company valuation increased to 40 billion in August Home sharing in which two or more unrelated individuals share a dwelling is also rapidly increasing in popularity. Airbnb, now an international home-sharing platform, is valued at over 20 billion.

7 The Market Overview Discussion on the perspective of the market demographics and dynamics of ridesharing and home sharing, including the percentage of millennials participating in ridesharing and home sharing How the insurance industry can adapt its marketing and/or product offerings to promote early capture of the millennials as high lifetime value customers and retention/capture of downsizing/urbanizing retirees

8 The Rideshare and Home Share Market Who are the major sharing economy companies? Market demographics What impact do the sharing economy platforms, including TNCs and home shares, have on society as a whole? Who are millennials? Dynamics of ridesharing and homesharing. Are the new platforms targeted to millennials? How the insurance industry can adapt its marketing and/or product offerings to promote early capture of the millennials as high lifetime value customers and to promote retention/capture of downsizing/urbanizing retirees. These companies have changed business and personal lives. What s the future look like? Can we expect to see more of these platforms?

9 Legislative Update Overview Process taken in Colorado with the lobbyists and legislatures on SB 125. Colorado was the first state to approve regulation for ridesharing. Recommendations for other states working through ridesharing legislation and other states updating legislation.

10 Legislative Update Ridesharing 2014 was a pivotal year for transportation network companies such as Lyft, Uber and Sidecar. Negotiations among the TNCs, insurance commissioners, legislatures and commissions ultimately led to today s requirements for insurance and other risk management-related issues. To set the stage for further discussion, can you summarize the key points of insurance and other items required? Process taken in Colorado with the lobbyists and legislatures on SB 125. Colorado was the first state to approve regulation for ridesharing. Periods 1, 2, 3 how defined and insurance requirements for each Driver background checks and MVR requirements Personal auto insurance verification Vehicle inspection requirements Accessibility Home Sharing While short-term rental is not a new concept, the use of short-term rental websites such as AirBNB.com, VRBO.com, HomeExchange.com and others is changing the way people seek out lodging today. There are ongoing debates focused on the use of multi-dwelling buildings and the rapid rise of Internet-based rentals on a short-term basis. Discussion to include: Housing regulations, including paying any local taxes Housing association rules risks to other tenants Owners rights Insurance exposures Recommendations for other states working through ridesharing legislation and other states updates on legislation

11 TNC/Insurer Compromise Requires that all TNCs and their drivers have auto insurance policies that recognize that the driver is driving for a TNC Expressly permits personal auto policies to exclude coverage for TNC-related driving and states that insurers that exclude coverage will have no duty to indemnify or defend No restrictions on underwriting or rating of personal auto polices Allows a personal auto insurer to offer TNC coverage via an endorsement or separate policy Allows TNCs to obtain coverage in the surplus lines market, according to statute

12 TNC/Insurer Compromise Period 1: Driver is logged in as available, but has not yet accepted a ride request. Primary liability coverage of 50/100/25 State-mandated coverages (e.g., UM or PIP) Does not include comprehensive or collision Period 2: Driver has accepted a ride request and/or, while the fare-paying passenger is in the vehicle, defined as Prearranged Ride. Primary liability insurance of $1 million State-mandated coverages (e.g., UM or PIP). Does not include comprehensive or collision

13 TNC/Insurer Compromise Purchased by the TNC driver, by the TNC itself, or a combination of both. The primary TNC coverage shall not be dependent upon a personal auto policy denying a claim before coverage is triggered. TNC drivers will be required to carry proof of TNC insurance coverage and, after an accident, TNC drivers must disclose whether they were logged into the TNC system. TNCs must disclose to their drivers the coverage they provide and that their personal auto policy may not provide any coverage for TNC-related driving. TNCs and insurers will be compelled to cooperate in coverage investigations. Insurers will have a statutory right to subrogate against TNCs for claims insurers may have erroneously paid.

14 Transportation Network Company Legislation

15 Overview of the Companies Discussion of the corporations Risk management Coverage aspect including workers compensation insurance

16 The Companies Ridesharing and Home Sharing The exposures and the insurance requirements were not typical for the insurers and were likely new to the broker community, insurance companies and reinsurers when the TNCs and short-term rental companies needed to procure their insurance placements. Was there a period of education for the market as they were looking to develop insurance solution? What was the response by the insurance marketplace? Admitted vs. surplus lines solutions What has been the response of commercial carriers? Has the industry responded with more specific exclusionary language? Aside from auto liability, what are the other key insurance coverages that are being addressed? General liability (e.g., assault/battery),technology, E&O and cyber liability D&O and EPLI Workers compensation/el in an environment of mostly independent contractors International What actions are companies taking to develop a comprehensive risk management program? Did the companies seek to establish controls in their operations? What was the impact from the regulators in the establishment of safety measures? How is the industry helping grow the sharing economy companies?

17 Claims in the Sharing Economy: Ridesharing Leading the Way The Claim The Coverage The Claim Issues

18 Really? Easy? TNC losses are the easiest claims of all time to adjust. - Uber Senior Counsel Curtis Scott, 2014

19 12/31/13: Sharing Economy Goes Viral With a Tragic Loss Pedestrian vs. Auto. The at-fault driver had his Uber app activated at the time.

20 Pulling the Plug Uber s condolences Driver deactivation Cost-benefit analysis Screenshot: Uber

21 Questions, Questions Did the girl dart out? Liability limit? Was the driver DUI? Uber = deep pocket

22 Who is Going to Pay? Insurance companies, right? Cost shifting Courts views

23 Unregulated Taxi Service Commercial taxi vehicle exposure Slam dunk? No coverage under a PAP for a commercial or for-hire vehicle The money question is: WHEN is it a commercial vehicle?

24 Claim Learning Curve Inadvertent coverage Carpooling activities? Ignore coverage implications? Increased public awareness Screenshot: Uber

25 Exclude Me? Focus on liability coverage What about first-party claims? Uber as your lienholder?

26 80-90% of TNC Drivers Lie Forbes 2014 survey of anonymous TNC drivers Facts. Initial investigation affects everything from reserving to litigation strategy. Nobody likes surprises.

27 Claims Shaken But Not Stirred Claim process remains the same. TNC in the ointment. Litigation costs. Determine coverage Determine your liability position Assess the damage exposure

28 The More the Merrier? What if a driver works with multiple TNCs? Who is primary? Multiple passengers from multiple TNCs? Permissive user issues

29 Bad Faith Every coverage denial has badfaith potential. New laws may be rewritten or clarified by courts. Best defense is a thorough claims investigation.

30 Consistency Investigations and decisions Significant state inconsistency Long-term benefits

31 Claims Best Practices Claims manual: TNC claims handling procedures TNC checklist Obtain as much APP info as possible Claims training

32 Knowledge Is Power: Data Sharing companies have a huge amount of data. Traffic conditions, travel patterns, residential occupancy. It may be for sale in the future.

33 The Dark Side Violation of distracted-driving laws Training drivers to be negligent Negligent hiring and training

34 Home Sharing Not the same TNC volatility HO exposures similar Social host liability, dangerous property conditions, damage to other dwellings, and so forth

35 Homeowners Claims Coverage, liability, damages. Business pursuit exclusion. Your insured is your safety control representative.

36 Reaching Out and Touching Everyone Auto, HO, GL, WC, property, aviation, and so on Uncharted territory touching all lines Claims due diligence

37 Claims Arising Out of House Calls Recreational Vehicles Private Pilots Trucking / Cargo Shuttle

38 Current Personal Auto Policy: Multistate Excerpt

39 Ridesharing Arrangements Insurance Applicability Phase TNC Coverage 1. Driver logged into TNC app but not matched with a passenger. Contingent liability coverage IF personal auto coverage declined/not available ($50/100/25)* 2. A match is made, but passenger is not in the driver s car. Primary liability, UM/UIM coverage at a higher limit ($1M)* Contingent comp/collision coverage 3. A passenger is in the driver s car. Same as Phase 2 *According to publicly available information, as of June 2,

40 Ridesharing Arrangements: Phases

41 Ridesharing ISO Activity Advisory policyholder notice Reinforced public or livery conveyance exclusion Personal auto and umbrella New coverage options Rules and rating provisions

42 Reinforced Public or Livery Conveyance Exclusion

43 Ridesharing Coverage Options

44 Ridesharing Coverage Options: Pricing Information

45 Home Sharing: Potential Exposure Considerations Insurer awareness Host, landlord and traveler exposures Host awareness House, apartment, spare room Frequency and length of stays Wide appeal: Young adults, retirees, unemployed, transient workforce Home Sharing Presence of owner on site Screening Local/municipal ordinance Risks may be similar to those of a bed and breakfast Landlord restrictions

46 Potential Exposure Concerns: Host Property: Loss to host s property/furnishings Loss of use Liability: Damage to property of traveler, guests Damage to landlord s furnishings Bodily injury to traveler, guests

47 Potential Exposure Concerns: Landlord Property: Loss to landlord s furnishings Liability: Damage to property of traveler, guests Bodily injury to other tenants, traveler, guests Comment: A landlord may act as a host (vacant unit). A homeowners policy may be issued to the owner-occupant(s) of a one-, two-, three- or four-family dwelling.

48 Potential Exposure Concerns: Traveler Property: Loss to traveler s property. Liability: Damage to host s and landlord s furnishings. Bodily injury to guests, building s other tenants, visitors. Personal injury due to poor reviews. Comment: Similar exposures currently exist for travelers at hotels, B&Bs, guest houses.

49 ISO Homeowners Policy Terms Used

50 ISO Homeowners Policy Policy Provisions

51 ISO Homeowners Policy Policy Provisions

52 ISO s Proposed Plans

53 ISO s Proposed Plans

54 The Sharing Economy: Closing Thoughts Sharing economy has emerged quickly. Driven by technology and potential for people to make/save money. Opportunity for insurers to serve new markets and innovate. Requires: Adjustment to traditional coverage provisions Creative coverage and rating options

55 Wrap Ridesharing and Home Sharing; Q&A As insurance professionals, how should we respond? How do we lend our knowledge and experience to help the technology industry advance with new business concepts? Question-and-answer period with audience

56 Thank You! Questions?