A new economic model has come to the forefront over the past decade as consumers look to own less and experience more. The sharing economy enables those with idle resources, like vehicles, homes and even their own labor to offer them for short-term rental. Although the sharing economy model has been around for ages, the recent growth in popularity, thanks to companies like Airbnb and Zipcar, requires us to understand the risks and opportunities better. This is especially true in the automotive industry.
Considering that the total value of the global sharing economy has been predicted to increase to $794 billion U.S. dollars by 2031, up from 150 billion U.S. dollars in 2023, now is the perfect time to understand sharing economy risk.
Understanding Sharing Economy Risk
One of the largest challenges for transportation network companies (TNCs) in this industry has been understanding the true risk they are taking on. TNCs and rental providers often take on significant liability for the drivers on their platform. For this reason, it is important to establish guidelines and screen applicants based on their previous driving history. Averaging $11 a report, motor vehicle records (MVRs) can be costly at the point of acquisition. As a result, companies may forego this step, leaving them vulnerable to future risk.
To mitigate this, data-driven solutions can provide TNCs with the tools they need to make informed decisions. By utilizing these technologies, insurers can help these clients save on MVR costs while improving overall risk management and operational efficiency.
How Data Can Fill Sharing Economy Risk Gaps
Many platforms have blind spots when it comes to understanding the full risk profile of their users, leading to unexpected liabilities. Leveraging data is the key to filling these gaps. By utilizing historical and continuous insights into driver behavior, companies can make more informed decisions and reduce their exposure to risk.
Sharing economy businesses can operate more securely and efficiently, protecting both their assets and reputation with the right data solutions. There are four primary ways that data can help insurers and their clients in the sharing economy.
Optimize MVR Fees
Sharing economy companies can reduce their acquisition costs by up to 60% by using historical driving data and license verification instead of costly MVRs. Accurate driving data can be used in place of or ahead of an MVR to pinpoint those needing further review, saving an average of $7 to $10 per driver.
One sharing economy client that used SambaSafety’s data solutions improved their reporting compliance and eligibility while getting near-instant MVRs for US-based on-demand orders.
Accelerate Applicant Qualification
Streamline the application process by gaining immediate access to comprehensive driver history and license information. With real-time data, companies can instantly qualify applicants who meet specific criteria. This speeds up the qualification process and ensures their network is comprised of drivers who align with the brand’s safety and operational standards – ultimately reducing sharing economy risk and improving on-road performance.
Help Your Sharing Economy Clients Manage Their Risk Proactively
Improve Driver Lifetime Value
Maximizing the lifetime value (LTV) of drivers is crucial for sustaining long-term success in the sharing economy. TNCs can receive ongoing alerts for any changes to license status or by continuous monitoring. Targeted micro-learning courses can be served after an event as a short safety reminder. This proactive approach helps to identify and address potential risks before they become costly issues. By ensuring that drivers are in compliance and minimizing incidents, companies can increase retention rates, enhance safety and reduce liability.
Ensure Compliance
Staying compliant in the sharing economy is critical, especially with the constantly evolving regulations for TNCs. By leveraging license verification, continuous monitoring and robust reporting tools, TNCs can confidently navigate complex compliance requirements.
A reliable partner will help the company efficiently meet TNC reporting standards, ensuring operations run smoothly without the risk of costly violations. Having configurable thresholds and automated alerts allows them to streamline risk and build a robust safety program, keeping them ahead of compliance issues while maintaining a high standard of safety across their platform.
Solving the Challenges Sharing Economy Companies Face
Modern business models come with unique challenges and require modern solutions. The high turnover rates and diverse range of driving experience within the sharing economy create significant challenges for both TNCs and insurers. As drivers constantly cycle in and out, risk management becomes increasingly complex. Insurers, in particular, face difficulties assessing the true risk of a changing driver pool.
Traditional rating methods struggle to keep pace with the dynamic nature of TNCs. To combat these challenges, real-time tracking has become essential. Instant access to data on driver behavior and utilization allows companies to make informed decisions and respond quickly to emerging risks.
Maintaining safety and efficiency requires a delicate balance. Businesses must keep costs in check while adhering to safety standards. By incorporating real-time insights and proactive management, companies can enhance both safety and cost-effectiveness in this fast-moving environment. Partners, like SambaSafety, can help commercial insurers add more value for their clients in the sharing economy with easy-to-implement solutions that uncover a driver’s true risk and save money.
