The ability to share resources and services is creating a new way to do business. Smartphone applications have made it simple to connect buyers and sellers to make use of their spare time, expertise, and unused assets.
It has created a whole new type of economy referred to as the shared, or gig economy. While it has created opportunity for many, it has also created a new category of risk and fraud when it comes to insurance.
What is the gig economy?
Composed of independent contractors and freelancers, the gig economy is made up of temporary and flexible jobs rather than traditional full-time employment. Workers typically work multiple short-term jobs, or ‘gigs’ on either a part or full-time basis.
The majority of these gigs are made available on an increasing number of marketplaces that match buyers and sellers for a fee.
The type of work available in the gig economy can be boiled down to two categories:
Labor-based gigs enable workers to provide activities or complete tasks like driving a car, delivering parcels or food, or providing digital services. It enables them to exchange their time for income.
Asset-based gigs enable owners to rent or sell their assets, making money on the things they already own that are otherwise going unused.
Want to rent your home? Check out Airbnb, VRBO, or Home Exchange
Sell your services? Upwork and Fiverr is the place to be
Rent your car? Turo, Zipcar, Car2Go or GetAround
Need a ride? Uber and Lyft
How about a bicycle? Spinlister
Need a dog sitter? DogVacay
You can even rent a pilot or private plane? OpenAirplane, AirPooler and FlightClub
The gig economy empowers individuals with access to unlimited work opportunities. For some, it’s an additional way to earn income, and for others, replace it entirely. More and more apps and marketplaces are becoming available, opening opportunities in additional markets and industries.
However, those opportunities have not come without risk.
Gaps in coverage
When it comes to renting a home, risk can range from something as small as leaving a door unlocked or a window open to the damage associated with appliances and equipment being improperly operated or even illegal activities occurring that break the terms of the agreement.
Having strangers in your car opens you up to risk in the unfortunate event of an accident. But not just for the driver. If you are the passenger of a ride-sharing service, how are you protected?
Since the products offered by the insurance industry haven’t quite caught up to the gig economy, there are gaps in the insurance products that are available. There may also be overlapping policies that offer different coverage based on very particular circumstances.
So risk is not just associated with the buyers or sellers who participate in the gig economy, but the insurers who cover them.
That’s why It’s extremely important for insurance providers and adjusters to know the risk involved and the opportunities for fraud to occur. Here are just a few examples:
1. Stolen Property or Identity
When people open their homes to strangers, they open themselves to risk. Electronics, expensive works of art, priceless jewelry and other items are all ripe for the taking. And it may not always be obvious who the culprit is.
It could be negligence on the renter for forgetting to lock a door when they go out for dinner. The owner may not even be aware of when the theft occurred if they are quickly flipping short term rentals and spend little time in the home.
And items of value within the home are not the only concern. If personal records and the owner's information are available, there’s the chance of identity theft and the culprit racking up thousands of dollars worth of expenses.
2. Falsified Claims & Photoshop
On the other hand, what if the owner and guest are in on it together? Simple photoshopped images pose a threat for fraud potential.
Maybe the guest stole an expensive item that was photoshopped into an image that never actually existed. Or a costly item was supposedly broken during the stay that was actually the work of some fancy photo editing. What if that slip-and-fall claim in the kitchen was collusion between the claimed owner and fake guest of a phantom rental?
3. Limitations in Coverage & Multiple Policies
When it comes to situations such as an electrical fire, a burst pipe, or a guest being injured, it can be difficult to respond without the facts. Each claim must be reviewed on a case-by-case basis.
The analysis will depend on the homeowners policy package as it may contain a special endorsement that could specifically exclude or limit coverage for guests under a home-sharing agreement. What other policies are they covered under based on the rental agreement and the service they used to book the rental in the first place?
4. Phony Drivers
When it comes to ride-sharing services, risks go beyond crashes and accidents. What if a stolen identity is used to create a false Uber or Lyft driver account? It’s a way for scammers to evade background checks and vehicle inspections, leaving passengers with no way of knowing who they’re getting into a car with. The potential exists for a convicted felon to be driving passengers around town.
Some drivers may even choose to hide their commercial driver status from insurers because they are either confused about their coverage options or they are trying to reduce their premium.
5. Illegitimate Fares
Coverage that’s offered by ride-sharing services like Uber is determined by whether or not the driver’s app was on during the fare. When the app is off, the driver is offline, and their personal auto insurance coverage takes over.
Accidents that occur during a trip or while the driver is on the way to pick up passengers have $1M in third-party liability coverage. But that’s assuming they’re on the job.
Drivers may swap advice on how to defraud their policies after collisions or other incidents based on the particulars of the incident.
They may also pursue fares with the app turned off. It’s easy to find a fare at the airport or in a crowded city. Some drivers may opt to take the ride for cash to make more money. But with the app turned off, their personal auto insurance takes over, creating a major exposure for passengers if they’re injured.
But it doesn’t end there
As the gig economy continues to evolve, so too will the associated risks and opportunities for individuals to commit fraud. That’s why it’s important for both insurers and adjusters to understand the specific policies involved with each individual claim and keep up with scams that pose a threat.
Should you need help servicing your claims, US Claim Solutions is here with extensive knowledge and expertise in both field and desk adjusting. We’re available to service claim needs 24 hours a day, 7 days a week.
Email us at customerservice@usclaimsolutions.co or give us a call at (888) 701-1153.
Sources:
- https://www.propertycasualty360.com/2020/03/04/what-the-gig-economy-means-to-insurance/
- https://home.kpmg/xx/en/home/insights/2019/05/insuring-the-gig-economy.html#:~:text=The%20gig%20economy%20insurance%20gap&text=Gig%20workers%20(and%20consumers)%2C,greater%20risks%20than%20traditional%20employees.&text=Therefore%2C%20the%20gig%20economy%20has,for%20these%20kinds%20of%20workers.
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