Sharing may sound utopian. But the sharing industry has a dark side and its name is insurance.
“Probably one of the hardest things we had to do in order to start our company was to get the insurance,” says Seth Peterson, co-founder and CEO of AllYouCanArcade.com, an arcade game rental business. Peterson says he had to call more than 100 insurance agents before he found one willing to work with him.
“Eventually what I did was I started to get my insurance license,” he says, “because I thought if no one is going to underwrite this, I’ll underwrite this myself.”
Peterson says the brokers he talked to were okay with the arcade game part of his business: “Then we would say, ‘Well, actually, though, we have these independent contractors who work for us, who fill demand across the entire United States.’ And that was the point where they just freaked out.”
While she didn’t freak out, Ashley Hunter, an insurance broker specializing in risky markets with HM Risk Group, does admit to a certain amount of surprise, confusion and doubt when she received the first inquiry from a potential client about the cost of a policy for his car sharing company.
“I literally looked at him and started laughing and said, ‘No one is going to insure this,’” she says. “There’s too many variables. I don’t know who’s using the vehicles. I don’t know when these cars are going to be used. What happens if someone is sharing the car and then it gets stolen? Who’s responsible?”
In the end, Hunter says, she was able to find a policy that worked for the car sharing service, as well as others. Now, she says the sharing industry is a niche she specializes in, as well as other, equally risky to insure industries – like fertility. But she notes that calculating rates for policies and deductibles for businesses like these can be complicated.
Phi Beta Iota: Insurance is an extraordinarily profitable business, a veritable “cash cow” for the simple reason that the insurance companies have the information advantage and calculate rates so they never lose — and in the USA, when they know they will lose, as with nuclear power plants, they lobby to have the US taxpayer cover losses while they retain profits. Insurance is the FIRST place where social enterprise in needed. Properly informed by a great university doing the research, there is every reason for the public to put insurance companies out of business.