4 ms·

Insurance (and by extension dealing with insurance fraud) for this sort of thing is a solved problem. They don't need to do it in house. They just pick up a p

by wheels 15y ago

Insurance (and by extension dealing with insurance fraud) for this sort of thing is a solved problem. They don't need to do it in house. They just pick up a policy from one of the institutional insurers and pass on the cost with a markup. Edit: To clarify, by "this sort of thing" I don't mean "Airbnb like businesses". There's nothing particularly novel about insuring homes, their contents or vacation rentals. An institutional insurer can crunch some numbers (with estimates on the average values of contents, caps on liability, frequency of incidents, cost of claims inspection, rate of fraud) and figure out what the risk profile on that is and then mark that up and sell it to Airbnb. What's actually unclear to me, however, after crunching out a revenue estimate for Airbnb (which I'd assumed was higher) is if they're a big enough fish yet for an insurer to bother with them.

scott_s 15y ago
Then they're an intermediary for the same kind of insurance that hotels and bed-and-breakfasts have. I don't know if that's even possible to do - how do you approach a company for a policy that covers hundreds of thousands of homes around the world?
farrel 15y ago
I would bet dollars to doughnuts that a traditional holiday apartment will only be able to get insurance that is viable if they meet a number of criteria (removal of valuables, cheap furnishings, inspection etc) that would not be available to someone putting their primary residence up for piecemeal rental on AirBnB
a3camero 15y ago
I doubt it is a solved problem or AirBNB would be using it. Imagine what the negotiations would be like. They need insurance for: -An open-ended number of people worldwide (constantly changing) -Any sort of property from shitty apartments all the way to fancy houses (no estimate of value possible, requires appraisers) -Damage/theft caused by people with unverified identities (all they have is CC, stolen?) -Any and all damage (including accidental death of people staying there?), including stolen identities and fire damage (to other properties as well?) -No security requirements for properties (fire alarms? carbon monoxide detectors? checking up on the place?) I have a feeling that would cost more than 10%.
- jonhohle 15y ago
  Imagine negotiating insurance for a mobile business where people are flung around 30+ feet in the air with no safety harness, others stick their heads in the mouths of lions or are "sat" on by elephants, and still others stick flaming swords into their throats. Meanwhile, children are riding on devices assembled by people who may not have a high school diploma (at least that's the impression I get). These businesses are generally very well insured. There are insurance companies that deal specifically with unique, high risk insurance situations that are only applicable to very few clients. You don't buy these policies from Nationwide (directly), but they likely have a subsidiary which handles policies like this. In turn, those subsidiaries take out insurance policies on the high risk policy (it's turtles all the way down). Disclaimer, my FIL used to work for an insurance company who dealt with high risk policies.
  - krschultz 15y ago
    That's not exactly the point. An insurance policy for a high risk activity - let's say skydiving - is very well definited. There are statistics on accident rates. There is a pretty defined payout when someone dies. The problem is not the risk level, it's the undefined nature of the problem. AirBnB doesn't know the value of the property they are renting. They don't have a long enough history to figure out what these kind of things could cost. What if I rent out a mansion, are they as liable there as in this case? Does AirBnB limit their pay out? These are questions they will have to come through at some point.
    - AlexandrB 15y ago
      > Does AirBnB limit their pay out? Yes. And make it clear that the payout is limited in the TOS. That way AirBnB/their insurer assume some well-defined amount of risk and it's not all on the renter. The issue of insurance fraud is tougher though.
      - rdl 15y ago
        The other tricky thing is that they need to negotiate this per jurisdiction. They can't sell insurance directly in most markets without being an insurer, and there are all kinds of BS legacy laws about referring and reselling insurance too. (i.e. you'd need to go to classes and be a registered agent to offer it) It would be a fun problem to solve for them. I don't think the actual per-room-night price for, say, $10-20k in contents and $bignum in liability (i.e. my guest burns down the building and kills everyone) would be that high; on the order of $10. 2m nights is enough to have some data, and this is similar to the vacation market. It could even just be a rider on top of existing homeowners/renters insurance. A nice trick might be to sell renters insurance at the same time, and make money off that (which is IMO something everyone should have anyway, even if they don't use airbnb), with free coverage for airbnb use.
hnal943 15y ago
Why isn't acquiring this type of insurance the responsibility of the renter?
prostoalex 15y ago
Sure, if you install a surveillance system or have a doorman/reception area, you can get a decent insurance rate. Also, you have to buy insurance in 6/12 month chunks, even if you rent out the place for 3 days a month. All of a sudden the rates that greedy hotel chains charge don't seem so greedy.

by wheels 15y ago

scott_s 15y ago

Then they're an intermediary for the same kind of insurance that hotels and bed-and-breakfasts have. I don't know if that's even possible to do - how do you approach a company for a policy that covers hundreds of thousands of homes around the world?

farrel 15y ago

I would bet dollars to doughnuts that a traditional holiday apartment will only be able to get insurance that is viable if they meet a number of criteria (removal of valuables, cheap furnishings, inspection etc) that would not be available to someone putting their primary residence up for piecemeal rental on AirBnB

a3camero 15y ago

I doubt it is a solved problem or AirBNB would be using it. Imagine what the negotiations would be like. They need insurance for: -An open-ended number of people worldwide (constantly changing) -Any sort of property from shitty apartments all the way to fancy houses (no estimate of value possible, requires appraisers) -Damage/theft caused by people with unverified identities (all they have is CC, stolen?) -Any and all damage (including accidental death of people staying there?), including stolen identities and fire damage (to other properties as well?) -No security requirements for properties (fire alarms? carbon monoxide detectors? checking up on the place?) I have a feeling that would cost more than 10%.

jonhohle 15y ago
Imagine negotiating insurance for a mobile business where people are flung around 30+ feet in the air with no safety harness, others stick their heads in the mouths of lions or are "sat" on by elephants, and still others stick flaming swords into their throats. Meanwhile, children are riding on devices assembled by people who may not have a high school diploma (at least that's the impression I get). These businesses are generally very well insured. There are insurance companies that deal specifically with unique, high risk insurance situations that are only applicable to very few clients. You don't buy these policies from Nationwide (directly), but they likely have a subsidiary which handles policies like this. In turn, those subsidiaries take out insurance policies on the high risk policy (it's turtles all the way down). Disclaimer, my FIL used to work for an insurance company who dealt with high risk policies.
- krschultz 15y ago
  That's not exactly the point. An insurance policy for a high risk activity - let's say skydiving - is very well definited. There are statistics on accident rates. There is a pretty defined payout when someone dies. The problem is not the risk level, it's the undefined nature of the problem. AirBnB doesn't know the value of the property they are renting. They don't have a long enough history to figure out what these kind of things could cost. What if I rent out a mansion, are they as liable there as in this case? Does AirBnB limit their pay out? These are questions they will have to come through at some point.
  - AlexandrB 15y ago
    > Does AirBnB limit their pay out? Yes. And make it clear that the payout is limited in the TOS. That way AirBnB/their insurer assume some well-defined amount of risk and it's not all on the renter. The issue of insurance fraud is tougher though.
    - rdl 15y ago
      The other tricky thing is that they need to negotiate this per jurisdiction. They can't sell insurance directly in most markets without being an insurer, and there are all kinds of BS legacy laws about referring and reselling insurance too. (i.e. you'd need to go to classes and be a registered agent to offer it) It would be a fun problem to solve for them. I don't think the actual per-room-night price for, say, $10-20k in contents and $bignum in liability (i.e. my guest burns down the building and kills everyone) would be that high; on the order of $10. 2m nights is enough to have some data, and this is similar to the vacation market. It could even just be a rider on top of existing homeowners/renters insurance. A nice trick might be to sell renters insurance at the same time, and make money off that (which is IMO something everyone should have anyway, even if they don't use airbnb), with free coverage for airbnb use.

hnal943 15y ago

Why isn't acquiring this type of insurance the responsibility of the renter?

prostoalex 15y ago

Sure, if you install a surveillance system or have a doorman/reception area, you can get a decent insurance rate. Also, you have to buy insurance in 6/12 month chunks, even if you rent out the place for 3 days a month. All of a sudden the rates that greedy hotel chains charge don't seem so greedy.