Home & Property

Online Home Sharing Services: The High Risk/High Reward Option for Landowners

“The Sharing Economy: An economic system in which assets or services are shared between private individuals, either free or for a fee, typically by means of the internet.”

– Investopedia

Our previous blog post on Uber covered the implications of car sharing on the insurance world, today we’ll focus on another attribute of the sharing economy: home sharing.

“Last night 40,000 people rented accommodation from a service that offers 250,000 rooms in 30,000 cities in 192 countries. They chose their rooms and paid for everything online. But their beds were provided by private individuals, rather than a hotel chain.”

– The Economist (2013)

The above statistic refers to one of the most prolific apps/websites for homeowners to offer their properties for lease online: Airbnb. Airbnb has created an opportunity for property owners and investors alike to enter the online world of short term rentals. It allows homeowners to fully utilize their assets by filling holes in long term leases and making use of empty rooms. However, without meeting tenants face-to-face there is the increased risk that they will not treat your property with respect. A quick Google search shows many horror stories about tenants that have brought bedbugs with them, thrown parties without the knowledge of their host, and even run illicit businesses out of their host’s property.

Airbnb-ing out your place may also cause tensions with your neighbours as there is limited accountability for obeying the rules. Airbnb has taken measures to foster credibility by implementing a system that allows hosts to write reviews on their tenants, and vice versa, much like Uber.

Airbnb offers their own “Host Protection Insurance” that protects hosts against up to $1 million USD in damages, and other insurers have developed their own insurance products to meet the needs of Airbnb hosts. Much like Uber, Airbnb took regulators by surprise and many cities are just catching up with the times and implementing rules to govern home sharing. For example, in some cities, short term renters are required to apply for a business license and treat their rental income as business income when it comes to taxation. Also, many cities are implementing laws that require Airbnb hosts to pay “hotel taxes” and carry liability insurance.

According to Statistics Canada, 9.5% of Canadians (2.7 million people) above the age of 18 participate in the sharing economy by using either ride sharing services or property sharing services, and this is growing exponentially as millennials enter the workforce. It is important for insurers and regulators to stay on top of this as sharing resources often means more complicated procedures for calculating how liability is to be shared.