Sharing economy not without its fish hooks

11 July 2016

The sharing economy is full of opportunities for regular New Zealanders - from Uber and Airbnb to YouDrive - but before you take the plunge, it may be wise to think about some of the potential fishhooks.

"The first important factor to be aware of is that you are operating a business, and businesses have to play by different rules," says AMP's Head of General Insurance Rob Dibley. "This may mean, for example, that you need to change from personal vehicle, home and contents insurance to a commercial policy, which involves the need for a wider programme of insurance and probable increased insurance costs.”


"Before cashing in on the sharing economy, take expert advice and do some research into the legal, financial, insurance and security implications. Know what you're getting into and work out your risk exposures and additional costs." Rob Dibley


Overseas-based sharing economy not always compatible with local conditions

Local conditions and legal requirements often differ from those that are stipulated by foreign companies like Uber, because most sharing economy companies have their headquarters offshore.

For example, to become an Uber driver is not terribly difficult, particularly after Uber decided recently that New Zealand drivers no longer need a passenger (P) endorsement.

However, New Zealand law says you must have a (P) endorsement if you want to carry paying passengers - for payment or reward - and not having one can result in severe penalties.

Changing your insurance from personal to commercial

Participating in the sharing economy may change your insured status.

"Personal insurance costs less because it is there to cover you and your assets for private use. The moment you start charging people for various services, you're perceived to have changed the use of your assets from personal to commercial usage.”

"Make sure you tell your insurance Adviser or insurance company about what you're doing and get advice from them on the best way forward."

Check the excess when it comes to overseas insurance

Mr Dibley said that while many sharing economy platforms do offer their insurance policies to users participating in the sharing business, it is important to understand the terms and conditions and how they apply to your personal circumstances.

"Research the excess that you will be required to pay. These are overseas companies with policies sourced overseas, and in some instances, the excess you have to pay may be fairly steep."

Sharing economy increases your responsibilities

By providing a service to members of the public, you are assuming a level of responsibility for their happiness, wellbeing and safety.

"Be aware that the public has expectations and failing to meet those expectations, may have consequences for your reputation. Also, be aware that you must also take steps to ensure your customers are kept well and safe when they are in your care," Mr Dibley said.

The growing sharing economy has made it more accessible for people to go into business, even if it's just to earn a few extra dollars, but remember that nothing is ever as clear cut and simple as a sales brochure might suggest. 

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The content provided is intended to be used as information only and does not constitute financial advice. Before acting on any of the results provided, we recommend that you seek advice which takes your individual circumstances into account.