Business Insurance

The Sharing Economy Goes B2B: Balancing Opportunities and Risk

By David Blessing

Wearable Technology


With just a click or tap, businesses and consumers are finding new ways to engage via the fast-evolving sharing economy. Today more than 70 percent of Americans have used some type of shared or on-demand service (Pew Research Center). And sharing-economy start-ups are not the only businesses that are benefiting. While these services can add competition, they also introduce opportunities for existing businesses, introducing ways to innovate and offer better, faster, and more cost-effective service. And this trend will continue to grow. With a projected $335 billion in revenue by 2025 according to PricewaterhouseCoopers, these services are no longer a novelty, but a new norm for meeting everyday consumer needs.

Business Opportunities via the Sharing Economy

Businesses have always had the option to contract with outside professionals and/or vendors for additional manpower, products, or services. But now, the sharing economy and its related technology platforms are expanding access, ease of use, and availability. As a result, more businesses are looking at how to use the sharing economy to enhance or expand their operations. Here are some examples of how some businesses are incorporating the sharing economy:

  • Commercial office and meeting space.  A business might find or rent out unused space for employee use or to host corporate events via services like ShareDesk, PivotDesk, or Splacer.
  • Freight and logistics.  Companies with available fleet, drivers, or cargo space are connecting with shippers via services like Cargomatic and Transfix.
  • Labor.  Businesses are delivering food, packages, and other items from point A to point B via ride-share and on-demand delivery providers like UberEats, Instacart, and Postmates.
  • Professional expertise.  Companies are engaging with vetted freelancers, from investment bankers, management consultants, and accountants to writers, designers, and web developers via services like Sparehire and UpWork.  

In addition to offering on-demand access to a variety of services, the sharing economy model can offer other positives as well. Many platforms offer immediate “crowdsourced" online performance reviews so businesses can quickly monitor the quality of the products or services they are delivering or receiving.

The sharing-economy model can also enable interactions with new and current customers via non-traditional channels, such as via a third-party mobile app versus in-person visit, which can help grow a company’s customer base, revenues, and brand.

What can be overlooked, however, is the connection to risk. What happens when someone representing your business causes a negative customer experience, or worse, harms someone or damages property? Liability and reputational damage can be costly consequences.

Risks in Sharing

To fully benefit from the sharing economy, businesses should consider the potential risks that could arise from operating in new ways and plan accordingly to appropriately protect themselves and their customers. With proper due diligence and strong engagement with their insurance brokers and carriers, businesses can proactively identify potential coverage gaps and steer clear of unintended consequences.

In addition to managing liability risk, businesses leveraging the power of the sharing economy will want to ensure:

  • Clarity of responsibility.  For any type of outsourcing model, a business should be clear what the responsibilities are for its operation as well as the other party. 
  • Consistency of service.  The sharing economy relies on freelancers, not employees, to produce goods and services. Keeping service quality and the overall experience consistent are critical to maintaining strong customer relationships.
  • Availability of service.  Although the sharing economy is growing worldwide, not all services are available in all locations. Businesses may need to seek alternative arrangements at certain times and in certain places.
  • Awareness of regulatory requirements.  Regulations are beginning to address the sharing economy, which may impact service. For example, some states are considering limiting the number of hours that ridesharing drivers can work.

Managing the risks

Because many sharing-economy firms are in the process of building out their operational models, they may still be working toward instituting proactive and consistent risk management practices. To stay one step ahead of potential misunderstandings and insurance gaps, companies planning to use sharing-economy services should consider the following:

  • Contracts.  Service models can be structured in different ways. A well-drafted contract spells out responsibilities, defines what risks each party is taking on by engaging in these services, and ensures that the liability is placed where it belongs.  
  • Insurance.  What insurance and limits does the third party have? Does the business need additional coverage to account for this shift in operations, such as expanding service? A review of insurance for each party can help avoid coverage gaps.
  • Quality assurance.  How does the service vet its freelancers? What kind of background checks does it conduct? What training or certifications are required? How are vehicles or other equipment maintained?
  • Program oversight.  Even though a third party may provide the service, a business still needs strong program oversight, especially if incorporating that service on a broad scale across multiple locations. In addition, it’s important to clearly set and communicate internal policies about how and when to use sharing-economy services. Without such guidance, employees may assume that any sharing-economy option is acceptable, which could lead to additional risk for the business. Tracking the performance of the service is also important, along with gathering feedback from customers and/or employees.

Liberty Mutual Insurance is engaging with traditional companies as well as sharing-economy service providers to better understand the needs and exposures across the business spectrum. We’re evolving our offerings to support these new models and address emerging risks and potential gaps left by traditional coverage. Much is changing in the way business is done and what customers expect, and we are partnering with our brokers and clients to keep insurance solutions on pace with an innovative world.

Wearable Technology
David Blessing

David Blessing, SVP, National Insurance Industry Excellence, Liberty Mutual Insurance.