By Vincent Vandendael, Lloyd's Chief Commercial Officer
Innovation comes in many forms – a new technology goes to market to solve every day inconveniences or a new social platform works to connect people in unimagined ways. Often, we sit back and marvel at the ingenuity and novelty of innovation, but seldom do we take a step back and look at the door it just opened. Within the sharing economy, that wide-open door has led to potential reputational and trust issues that could not only ruin a brand’s relationship with its consumers, but also stifle industry growth.
At Lloyd’s, we have the unique vantage point of watching innovation unfold as we provide the protection that enables new and disruptive technologies to progress. Our history is steeped in insuring the complex and unconventional, and today’s burgeoning sharing economy is just that.
Bridging the expectation gap
With any emerging market or innovative new technology, rules of the road are at times made on the fly and evolve in lockstep with the market. Today in the sharing economy, the traditional supplier-customer relationship is being challenged by an evolving platform-provider-consumer relationship wherein responsibility is perceived differently by each party.
According to Lloyd’s “Sharing risks, sharing rewards: Who’s responsible in the sharing economy?” report, 97% of sharing economy participants assume some sort of risk protection is offered for consumers and providers if something goes wrong, but only 28% reported actually looking.
This expectation gap, as well as other issues including risk management and insurance transparency, are getting lost in the mix – leaving an unaddressed expectation where everyone thinks someone else is bearing the risk.
Reputation and trust at stake
As the expectation gap widens, sharing economy companies are at greater risk of losing consumer and public trust. Encouragingly, we are already seeing numerous sharing economy companies recognize the importance of instilling consumer confidence and taking steps to protect their users and their reputation.
The potential loss of consumer trust is significantly more impactful for the sharing economy. The system depends on individuals trusting the platform to engage reputable providers to share their goods or services, as well as responsible consumers who are confident they are protected when engaging with strangers.
Risk confusion stands as a barrier to growth
As things stand, PwC reports that the sharing economy is projected to grow significantly and generate $335 billion of revenue by 2025. But Lloyd’s recent sharing economy survey shows only 16% globally report having shared assets or services.
The Lloyd’s survey also finds that the majority in the US and UK (58%) believe the benefits do not outweigh the risks when it comes to engaging the sharing economy. Consumers cite several risks of usage including:
- Damage to assets
- Theft of property
- Concern for personal safety
This paints a clear picture that, in order for the industry’s growth potential to be realized, sharing economy companies need to be more transparent about how the perceived risks will be mitigated. As with any new technology, product, or industry, consumer relationships need to be fortified to ensure trust remains on solid footing. Communicating risk and providing consumers with clear, transparent policies is just one step in earning trust and building a strong reputation.