Factoring Home Sharing Into the Insurance Underwriting Process

Factoring Home Sharing Into the Insurance Underwriting Process
We recently discussed some of the emerging risks impacting today’s insurance carriers, with one of these being the evolution of a sharing economy. The term “sharing economy” refers to peer-to-peer based sharing of access to goods and services, and the bulk of these transactions take place online via tools like Facebook Marketplace. However, one aspect of the sharing economy that has caught on like wildfire is the concept of home sharing.
The Rise of Home Sharing
With home sharing, the property owner rents out his home or a portion of his home in exchange for additional income. Airbnb is a popular online marketplace and hospitality service that connects property owners looking to home share with travelers seeking short-term lodging solutions. Part of the appeal behind Airbnb is the authentic experience that staying in a local’s home provides. In most scenarios, home sharing via a service like Airbnb is more affordable than paying for a traditional hotel room.

Millennials, in particular, have embraced the concept of home sharing. According to a recent Airbnb study, 85 percent of Millennials support the idea of renting out their home or a portion of their home to visitors to earn some extra income. Being able to use an online marketplace like Airbnb to rent a swanky apartment or room for half the price of a traditional hotel room is also attractive to Millennials that value efficiency, affordability, and practicality.

Home Sharing Needs to Be Factored Into the Underwriting Process
With more and more homeowners considering their options for home sharing, insurance carriers can offer a lot of value by making insureds aware of the potential risks associated with going down this route. By making a property inspection part of the underwriting process, insurance carriers have an opportunity to speak face-to-face with insureds about these risks and ways to mitigate them.

If a homeowner mentions during a property inspection that he or she is considering home sharing, insurance carriers need to factor this into the underwriting process. Given the popularity of home sharing these days, home sharing endorsements can now be added to a homeowner’s insurance policy to ensure that the property owner is adequately covered. Talking to insureds about how often they plan to rent their home and how much income they want to make from rentals will help insurance carriers determine how much additional coverage may be needed.

Our team at Insurance Risk Services has been partnering with property and casualty insurance carriers to provide underwriting support in the form of property inspections for nearly 40 years. We’ve watched the industry evolve over the years, and it’s important that insurance carriers take into account the impact of the sharing economy in underwriting. When completing a property inspection, we make sure to ask the right questions to identify risk to help ensure that the right coverage is in place.

Contact us to learn how Insurance Risk Services can help you best determine which risks are worth taking.