In a world where the largest hotelier may soon be a company that doesn’t own a single building and the largest cab company may soon be a company that doesn’t own a single vehicle, insurers may need to seriously re-think their own business models.

The examples of Airbnb and Uber, respectively, highlight the rapid emergence of what is being called the “Sharing Economy”—a radically new way of doing business enabled by the disruptive combination of pervasive technology and the coming-of-age of the first generation to have grown up immersed in that technology.

And it’s not just technology that‘s driving these Millennials, typically defined as those born between the early 1980s and the early 2000s, to pioneer a more collaborative way of doing business.  Having reached adulthood in challenging economic times — and often with substantial college debt — this generation epitomizes necessity’s motherhood of invention.

Unable to qualify for capital through conventional banking channels, Millennials  have embraced the crowdsourcing alternative Kickstarter.  And rather than allocate their limited cash to a limited choice of entertainments, they gladly subscribe to all-you-can-eat services such as Spotify, Netflix and Gamefly.

This is not to minimize the central role technology plays in enabling people to now share ideas, content and resources with such transformational ease and immediacy.  When everybody has a device in their pocket that can connect to the devices in everybody else’s pocket—and to every imaginable service in the cloud—all kinds of interesting things are liable to happen.

The question for insurance companies is which of those things might be most important to their business going forward.

Denise Garth, a partner at insurance advisory firm Strategy Meets Action, highlights a few possibilities in a new report entitled “Crowdsourcing and Open Innovation: Powering the Sharing Economy.”  Garth cites the example of WeGoLook, a crowdsourced service that offers customers the ability to hire freelance “Lookers” to perform inspections and other tasks on demand.  Such a service offers insurance companies the ability to reduce the cost of claims operations while expanding their geographic footprint without capital outlay.

Garth also notes that open innovation communities offer insurance companies an alternative means of developing and testing the new applications they will need to successfully compete in an increasingly digital marketplace.

At the same time, the Sharing Economy is also bringing about changes in the types of risks that insurers may want to address in order to maintain their market relevance.  Auto insurers, for example, may want to develop new usage-based models for shared-vehicle services such as Zipcar and car2go in order to more fairly and cost-effectively align risk and cost.

Above and beyond these operational considerations, insurance executives may need to get their arms around the more fundamental impact that a new culture of open, technology-enabled collaboration may have on organizations and the people who make the run day and day — an impact that is likely to transcend line-of-business P&L.

“The clinical reality is that human beings are wired to be social and helpful,” claims noted futurist and MIT principal scientist Andrew McAfee.  “So the good feeling we get from the new collaborative ways of doing business that are becoming available to us will be as much as or more of a factor in their adoption as their financial benefits.” 

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