4 ms·

i wonder if AirBnB could suddenly find themselves in the lucrative insurance business? Or maybe this aspect would be a big turn off point for renters.

johnny99 12y ago
Might be similar to financing offered by car companies: is a less-known aspect of what they do, but I believe very lucrative. For that matter GM has offered insurance deals before: http://www.autoblog.com/2011/07/10/free-car-insurance-from-gm/ http://www.autoblog.com/2011/07/10/free-car-insurance-from-g...
- curiously 12y ago
  GM is a perfect example, at one point as I've read, they were making more money from insurance and financing than from an average car sale.
  - bradleyjg 12y ago
    GMAC was profitable until it wasn't. From wiki: The company was founded in 1919 by General Motors Corporation as the General Motors Acceptance Corporation (GMAC) to be a provider of financing to automotive customers. Over the following years the business has expanded to include insurance, online banking, mortgage operations, and commercial finance. ... In 2006, General Motors Corporation sold a 51% interest in GMAC to Cerberus Capital Management, a private equity company. Also in 2006, GMAC divested a majority stake of GMAC Commercial Holdings, its real estate division, to a trio of investors — Goldman Sachs, KKR and Five Mile Capital Partners — thereby creating Capmark Financial Group Inc. Capmark later filed for bankruptcy and was acquired in part jointly by Leucadia and Berkshire Hathaway. On December 29, 2008, the United States Department of the Treasury invested $5 billion in GMAC from its $700 billion Troubled Asset Relief Program (TARP). ... On May 21, 2009, the U.S. Treasury announced it would invest an additional $7.5 billion in GMAC LLC, which gave the U.S. government a majority stake in the company. On December 30, 2009, the U.S. Treasury department said that they would invest another $3.8 billion in GMAC because the company had been unable to raise additional funds in the private sector. This raised the total government investment in GMAC to $16.3 billion. ... As of January, 2012, TARP had about $12 billion invested in Ally. The government stake represented a 74% ownership interest in Ally. In March, 2012, Ally failed the Federal Reserve's financial "stress test" for capital adequacy. The company said in a statement that the Fed's “analysis dramatically overstates potential contingent mortgage risk”. A possible outcome would be a requirement to raise additional capital. On May 15, 2012, the company put its ResCap subsidiary into Chapter 11 bankruptcy after it failed to make an interest payment of $20 million on unsecured debt. ResCap had written off $22 billion in mortgages in 2009, 2010, and 2011 much of it subprime mortgages. The move was seen as attempt for the company to focus on its profitable core business of auto loans and direct banking (Ally showed a $2.72 billion profit in 2011 in its auto finance unit but had a $402 million loss at ResCap).
    - Scoundreller 12y ago
      Which begs the question: What was it that put GMAC into bankruptcy, financing and insuring* its own vehicles, or its unrelated operations. * Which would have the fortunate side-effect of encouraging its parent to develop safer cars
      - bradleyjg 12y ago
        It seems pretty clear that mortgages and derivative instruments built on top of them are what really did them in, just like so many other banks. That said, AFAICT the lending models for cars were no more sophisticated than those for houses. Lots of concern over individual borrower risks, but not much at all for an economic downturn that would sour many many loans at once and depress the value of the collateral at the worst possible time.
greenyoda 12y ago
Not very likely. Insurance is a highly regulated business (at the state level, in the U.S.), and insurers need to satisfy regulators that they have the capital reserves to cover their customers' claims. It's not something that a small company can easily do.
- deleted 12y ago
  [deleted]
- _delirium 12y ago
  I could see AirBnB reselling someone else's insurance perhaps. I agree it's less likely they'd run the actual insurance business themselves. Besides the capital and compliance parts, property insurance is also fairly labor-intensive, requiring a large organization to do it on a national basis (let alone international). Claims investigation is pretty fact-specific, requiring you to have staff on the ground more or less everywhere you sell insurance, who are able to interface with police departments, inspect properties, investigate fraud, litigate claims, etc. (And if you skimp on the claims investigation bit, you'll get eaten alive by scammers with false insurance claims.)
  - username223 12y ago
    > I could see AirBnB reselling someone else's insurance perhaps. If AirBnB and Uber want to "go legit," this would be a good way to do it: bargain with insurers for a discounted group rate, then require their "contractors" (i.e. employees) to be properly insured. They could even do the research on homeowner's insurance themselves, and make it nearly painless for employees to make sure they're obeying the law.
- fiatmoney 12y ago
  It's pretty standard for one company to be responsible for sales and claims, and another responsible for actually underwriting. The latter is much more regulated in most places (what you can invest in, what loss ratio you have to maintain, pricing, etc). AirBnB could probably do the first if they wanted to.
- thom 12y ago
Spooky23 12y ago
I doubt it, because they then couldn't walk around whistling Dixie and deny knowing that their business partners needed something that most don't have. Also, how do you underwrite insurance and remain ignorant of whether or not operating as a AirBnB "host" is legal?
wwweston 12y ago
They really should, just like Uber should get insurance for their drivers. Even if you ultimately have the end providers bearing the premiums, Uber and AirBnB are in a much better position to negotiate premiums and coverage at scale.
- kalleboo 12y ago
  Isn't this similar to the Uber plan? https://www.airbnb.com/host-protection-insurance https://www.airbnb.com/host-protection-insurance

johnny99 12y ago

Might be similar to financing offered by car companies: is a less-known aspect of what they do, but I believe very lucrative. For that matter GM has offered insurance deals before: http://www.autoblog.com/2011/07/10/free-car-insurance-from-gm/ http://www.autoblog.com/2011/07/10/free-car-insurance-from-g...

curiously 12y ago
GM is a perfect example, at one point as I've read, they were making more money from insurance and financing than from an average car sale.
- bradleyjg 12y ago
  GMAC was profitable until it wasn't. From wiki: The company was founded in 1919 by General Motors Corporation as the General Motors Acceptance Corporation (GMAC) to be a provider of financing to automotive customers. Over the following years the business has expanded to include insurance, online banking, mortgage operations, and commercial finance. ... In 2006, General Motors Corporation sold a 51% interest in GMAC to Cerberus Capital Management, a private equity company. Also in 2006, GMAC divested a majority stake of GMAC Commercial Holdings, its real estate division, to a trio of investors — Goldman Sachs, KKR and Five Mile Capital Partners — thereby creating Capmark Financial Group Inc. Capmark later filed for bankruptcy and was acquired in part jointly by Leucadia and Berkshire Hathaway. On December 29, 2008, the United States Department of the Treasury invested $5 billion in GMAC from its $700 billion Troubled Asset Relief Program (TARP). ... On May 21, 2009, the U.S. Treasury announced it would invest an additional $7.5 billion in GMAC LLC, which gave the U.S. government a majority stake in the company. On December 30, 2009, the U.S. Treasury department said that they would invest another $3.8 billion in GMAC because the company had been unable to raise additional funds in the private sector. This raised the total government investment in GMAC to $16.3 billion. ... As of January, 2012, TARP had about $12 billion invested in Ally. The government stake represented a 74% ownership interest in Ally. In March, 2012, Ally failed the Federal Reserve's financial "stress test" for capital adequacy. The company said in a statement that the Fed's “analysis dramatically overstates potential contingent mortgage risk”. A possible outcome would be a requirement to raise additional capital. On May 15, 2012, the company put its ResCap subsidiary into Chapter 11 bankruptcy after it failed to make an interest payment of $20 million on unsecured debt. ResCap had written off $22 billion in mortgages in 2009, 2010, and 2011 much of it subprime mortgages. The move was seen as attempt for the company to focus on its profitable core business of auto loans and direct banking (Ally showed a $2.72 billion profit in 2011 in its auto finance unit but had a $402 million loss at ResCap).
  - Scoundreller 12y ago
    Which begs the question: What was it that put GMAC into bankruptcy, financing and insuring* its own vehicles, or its unrelated operations. * Which would have the fortunate side-effect of encouraging its parent to develop safer cars
    - bradleyjg 12y ago
      It seems pretty clear that mortgages and derivative instruments built on top of them are what really did them in, just like so many other banks. That said, AFAICT the lending models for cars were no more sophisticated than those for houses. Lots of concern over individual borrower risks, but not much at all for an economic downturn that would sour many many loans at once and depress the value of the collateral at the worst possible time.

greenyoda 12y ago

Not very likely. Insurance is a highly regulated business (at the state level, in the U.S.), and insurers need to satisfy regulators that they have the capital reserves to cover their customers' claims. It's not something that a small company can easily do.

deleted 12y ago
[deleted]
_delirium 12y ago
I could see AirBnB reselling someone else's insurance perhaps. I agree it's less likely they'd run the actual insurance business themselves. Besides the capital and compliance parts, property insurance is also fairly labor-intensive, requiring a large organization to do it on a national basis (let alone international). Claims investigation is pretty fact-specific, requiring you to have staff on the ground more or less everywhere you sell insurance, who are able to interface with police departments, inspect properties, investigate fraud, litigate claims, etc. (And if you skimp on the claims investigation bit, you'll get eaten alive by scammers with false insurance claims.)
- username223 12y ago
  > I could see AirBnB reselling someone else's insurance perhaps. If AirBnB and Uber want to "go legit," this would be a good way to do it: bargain with insurers for a discounted group rate, then require their "contractors" (i.e. employees) to be properly insured. They could even do the research on homeowner's insurance themselves, and make it nearly painless for employees to make sure they're obeying the law.
fiatmoney 12y ago
It's pretty standard for one company to be responsible for sales and claims, and another responsible for actually underwriting. The latter is much more regulated in most places (what you can invest in, what loss ratio you have to maintain, pricing, etc). AirBnB could probably do the first if they wanted to.
thom 12y ago

Spooky23 12y ago

I doubt it, because they then couldn't walk around whistling Dixie and deny knowing that their business partners needed something that most don't have. Also, how do you underwrite insurance and remain ignorant of whether or not operating as a AirBnB "host" is legal?

wwweston 12y ago

They really should, just like Uber should get insurance for their drivers. Even if you ultimately have the end providers bearing the premiums, Uber and AirBnB are in a much better position to negotiate premiums and coverage at scale.

kalleboo 12y ago
Isn't this similar to the Uber plan? https://www.airbnb.com/host-protection-insurance https://www.airbnb.com/host-protection-insurance