By Jenée Tibshraeny
The ‘share economy’… It’s all the rage at the moment.
Using a platform to trade goods or services person-to-person, cutting out the middle man, reducing barriers to entry for sellers, and bringing down prices for buyers.
Think Harmoney, Trade Me, Airbnb, Uber, Bookabach and PledgeMe.
What’s not to love about this age-old concept, revamped and improved by technology?
We’ve all heard how the share economy is ‘disrupting’ the market, as it’s giving individuals new ways to become entrepreneurs, and consumers new ways to buy stuff.
Using Bookabach and Airbnb to look for a holiday home to escape to during my summer break, it hit me just how much the success of the share economy hinges on trust.
I trust the owner of the bach I’m hiring to be honest in their description of the place, and they’re trusting I’m not a ‘crazy’ who’s going to damage their property.
While a broken BBQ may put a dampener on my holiday, most of the risk in the exchange lies with the property owner, who’s giving me free rein over one of their most valuable assets.
They’re trusting I’ve been truthful in saying I’m part of a group of six friends looking to hire a bach... not a busload of boozy 18-year-olds or a member of a dog training club.
While property owners on Bookabach have no means of verifying my identity, Airbnb requires you to upload a photo of your driver’s license or passport and links you to either your Facebook, Gmail or LinkedIn account.
The only other information that property owners have to determine my credibility, is the sparse feedback other Bookabach or Airbnb users I have had dealings with, have left on my profile.
Otherwise, they have nothing on me – they can’t get me to pay a bond or charge my credit card if I damage something, like a hotel can.
The hurdles to jump to insure a bach
If the trust in the people who make up the share economy falters, insurance is a property owner’s first backstop.
Yet getting a bach insured isn’t plain sailing and can be costly.
A claims specialist for Insurance Australia Group (IAG), which sells insurance through State, AMI, Lumley and NZI, says the insurer doesn’t have specific ‘bach insurance’ policy wording.
Chris Kiddey says: “This means that we will either agree to insure the bach under a ‘standard’ home insurance policy, or we won’t insure at all.”
He says IAG will consider the condition of the bach – whether it’s good enough to qualify as a ‘home’, or as a ‘dwelling’ according to Earthquake Commission criteria.
It will also look at the level of supervision the bach gets when it’s unoccupied, and when it has renters or tenants.
Perhaps most importantly, it’ll consider what the bach is primarily used for, and if it should be considered a source of income.
Kiddey says: “This consideration is flexible depending on the other factors, but generally speaking if the home is mostly rented out for variable periods and less frequently occupied by you, the owner, then we may feel it’s a risk we can’t cover.”
The devil’s in the detail
Even after jumping the hurdles to insure a bach, there are a few things property owners need to do to ensure they’ll actually be covered.
State’s Comprehensive Home policy has a ‘vacant home’ exclusion for example, stipulating your policy will be automatically suspended if you or someone authorised by you hasn’t been living in the home for more than 60 consecutive days.
However the policy may be continued if you’ve told State the property is a holiday home, and the place is inspected inside and out at least every 60 days, has its grounds “adequately maintained”, mail cleared regularly, water supply turned off, and doors locked and windows secured.
Bach owners won’t be eligible for ‘breakage cover’ under this State policy, if their tenants accidentally hit a cricket ball through a window or damage any permanently fixed fixtures in the house, as this cover applies only if the owner of the property is occupying the place when the breakage occurs.
As for ‘intentional damage’ to the bach, property owners are covered only if the loss was caused by a fire or explosion.
The State Comprehensive Home policy also has a detailed criteria for what property owners need to do if they want to be covered in the event of a tenant damaging the property through the manufacture, storage or distribution of drugs.
Property owners, or those managing their properties need to have: “Exercised reasonable care in the selection of tenants by at least obtaining satisfactory written or verbal references; completed an internal and external inspection of the property at a minimum of three monthly internals upon every change of tenants; kept a written record of the outcome of each inspection, and provided to us a copy of the record if we requested it.”
See this story for more on avoiding druggie renters burning holes in your pockets.
Airbnb offers to reimburse hosts up to $1.3m for damage caused by tenants
The platforms that property owners use to rent out their houses might take some responsibility in the event of a tenant causing damage, but this varies.
For example, Bookabach’s terms and conditions say:
“We provide a service that puts you in touch with holiday home accommodation providers. If a rental proceeds, you are entering into a rental agreement with the accommodation provider, not Bookabach.”
Accordingly, its says Bookabach users carry out transactions entirely at their own risk, and Bookabach takes no responsibility for fraudulent behaviour. It also stipulates it isn’t liable for any damages or loss caused by the use of any information on the site.
Airbnb – being the international market leader of its type – says it’ll reimburse hosts up to $1.3 million for damage caused to their properties.
Airbnb makes it clear its Host Guarantee isn’t ‘insurance, so does not replace any private insurance cover property owners may have.
Accordingly, Airbnb can decide how much it wants to reimburse a property owner if they make a claim, based on the “availability of insurance proceeds under the Airbnb Insurance Policy”.