In September 2017, The Times reported that Airbnb now has four times as many listings in the UK than hotels. The company is now valued in excess of $31bn and offers 168,000 listings in the UK alone.
Airbnb clients (or hosts) are your clients, and they have unique and evolving general insurance needs that require your guidance.
Much has been debated about Airbnb over the last few years, most recently concerns that landlords are choosing this route rather than taking long-term tenants, a situation blamed in part for increasingly high rents in the UK.
What is certainly true, according to Airbnb themselves, is that 55% of all listings on its site are for entire properties rather than rooms to rent.
While this is a popular and lucrative proposition for landlords and private homeowners alike, do your home-sharing clients and landlords really understand the implications and exclusions that could potentially invalidate their home insurance?
Minimal cover
Airbnb hosts who fail to inform their building and contents insurers about their fee-paying guests are potentially risking their homes. Of course, the reason many don’t declare it is that it is possible their insurer will increase their premiums or refuse cover.
But the bigger risk is that if they keep quiet and they find themselves in a claim situation where their insurer may not pay out, and their insurance could be invalidated.
Airbnb does offer a Host Guarantee, purporting to insure people using their platform up to £600,000 for loss or damage.
But, and it is a big but, cover is limited. It does not protect cash or shared common areas and has very limited cover for jewellery, collectibles and artwork.
I’d wager not many hosts would be able to recover the cost of loss or damage from it.
A big ask
The Host Guarantee only covers actual cash value of items stolen or damaged, including deductions for age or wear and tear, with restrictions for high value items, and exclusions for “mysterious disappearance” or shortages from an inventory.
What is more, they expect that in the event of loss/damage the host should seek remuneration directly from the guest in the first instance, and only revert to the guarantee if an agreement cannot be reached.
All of this must be done within 14 days, with a crime reference number, proof of ownership and value documentation – a big ask.
Airbnb make it very clear in their terms and conditions that this guarantee should not replace the host’s home insurance.
But this is where the big problem lies; standard home insurance policies will not cover all the risks hosts face.
While most insurers will accept infrequent/short term/occasional non-paying visitors such as relatives or friends, as a general rule renting out a room to a stranger (especially if you are charging them), even if only for a short amount of time, creates a risk that insurers are unwilling to cover.
Even where an insurer does accept visitors of this nature they will almost certainly enforce restrictions, including:
- No cover for the possessions of the visitor
- Restrictions on damage to the property/contents caused by the visitor, such as accidental loss, malicious damage, or theft unless there is evidence of forcible or violent entry
- Restrictions on valuable items of contents
A valued adviser
If you have a client that is looking to use Airbnb, or the like, please advise them to get in touch with their insurer before they proceed; find out if they will accept paying guests, inform them about how the rented rooms will be used, and find out what restrictions or exclusions they will impose.
Also take the time to research and offer them specialist alternatives, we are starting to see some of our non-standard insurers offering cover.
As a valued adviser your role is to ensure that they take hosting insurance seriously.
While it has very recently been reported that European Court of Justice rulings are likely to enforce tougher regulations on Airbnb, and other sharing economy services, this remains a widely unregulated market and as such despite the financial advantages it is still risky territory.
Let’s all make sure that the sharing economy does not become a risk economy for our clients, and protect what matters most to them as they take part in this disruptive new market force.
