Sharing economy an opportunity for insurers, government should focus on objectives: OMIA speaker

Regulators would do well to resist taking a “whack-a-mole” approach to the sharing economy – something that could result in a $20 billion market in Canada within the next decade – and, instead, consider their ultimate objectives, Sunil Johal, policy director of the Mowat Centre, said Thursday during a presentation at the Ontario Mutual Insurance Association’s (OMIA) Annual Convention in Toronto.

“The sharing economy currently is more than $15 billion globally,” Johal told attendees of the session, Policymaking for the sharing economy. “Within 10 years, that’s expected to be $335 billion, which, in Canada, probably translates to somewhere between $10 billion to $20 billion market for all sharing economy activity,” either net new or complementary, he reported.

“A lot of those activities are going to require some form of insurance. It’s not clear which ones will and which ones won’t, but I think we can assume things like home, auto, there’s going to be space there,” he said.

A potential stumbling block, though, is that some of the same challenges identified by the Mowat Centre – an independent public policy think tank in the University of Toronto’s School of Public Policy & Governance – in its Policymaking for the Sharing Economy: Beyond Whack-A-Mole report last year remain today.

“What we were seeing at the time and I would argue we’re still seeing even a year later now is that governments are taking a very reactive approach to this emerging field,” Johal commented. “Something pops up like an Uber, governments haven’t really thought of what to do, so they immediately try to crack down or hit it on the head, hope it goes away and doesn’t show up somewhere else,” he quipped.

“The problem is it’s showing up all over the place and it’s all kinds of different companies,” he noted, adding there is plenty of appetite and interest in the issue among the private sector, the public sector and others, including insurers.

“Right now, (the sharing economy is) disrupting sectors like taxis and accommodation, but what are some of the other sectors that are ripe for disruption by this type of technology and these type of business?” Johal asked.

“I think there are definitely major opportunities for the insurance sector in this space, because you are seeing more and more economic activity happening in the sharing economy,” he told OMIA attendees.

“Most government structures and processes were set up a hundred or 50 years ago and they haven’t really adapted in that time,” Johal noted. Add that “most of the responses from a government point of view have been disconnected,” he said. “We don’t see the province of Ontario developing province-wide rules.”

For something like taxis, for example, municipalities are “all developing their own different rules. Logically, that really doesn’t make sense,” Johal argued. “Generally speaking, our advice to governments is you need to take a step back and think about what’s your ultimate objective,” he told attendees.

As an example, for taxis, questions that would need to be asked to reach the objective would likely include the following: Are the taxis safe? Do we have a competitive system that’s giving fair prices and service quality? Are taxis accessible for people with disabilities?

“If we know that our regulations are driving towards those three objectives, I think we should start reducing the rules we have in this space,” Johal suggested.

In general, the following things are recommended:

• more performance-based regulation;
• harnessing data on reputation and operation;
• using waivers and exemptions for learning periods;
• reviewing existing regulations; and
• considering tiered approaches for part-timers.

As always, however, with opportunity comes risk. “There’s not a lot of good data about what types of activities are happening here,” Johal told session attendees.

“There’s a lot of variables about who is engaging in the (sharing economy) space, how often are they doing it. A lot of it is self-reported right now,” he pointed out.

“So how do you navigate those risks and uncertainties, which is essentially what insurance is all about,” he said, to be able to price things appropriately and develop coverage.

“Insurance, like many sectors like governments, tend to have an on or off switch,” Johal suggested. “You’re either doing something in a commercial sense or you’re doing something in a personal sense. We don’t really think of things in the grey area, but that’s exactly what the sharing economy is doing,” he said.

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