Update: We’ve released a new whitepaper examining the Sharing Economy industry. We dive into the insurance landscape, legal climate and how to approach risk management for companies in this sector. You can download the report here!
Food for thought: on-demand services company risk profile
The on-demand services company (think Uber, Makespace, Fly Cleaners…) is taking over the B2C services industry and blowing traditional business models out of the water. These companies help consumers get anything done at the push of a button. However, this blend of technology and provision of traditional business services creates a wider risk profile. We’ll use Fly Cleaners, an on-demand dry cleaning service, as an example for each risk.
Physical damage, encompassing bodily injury and property damage, presents a significant and ever-present challenge to on-demand service providers. These companies typically involve their employees in close interactions with customers and their belongings, elevating the level of risk well beyond that encountered by your typical tech firm. To illustrate, let’s consider Fly Cleaners as an example and explore some effective ways to reduce risk exposure. This could involve preventing mishaps like damaging a customer’s $5000 custom suit or averting accidents with pedestrians while drivers are en route to pick up a customer’s dry cleaning, among other strategies.
Companies can (and should) put controls in place to prevent these mishaps. Employee handbooks, quality control procedures, and formal HR procedures will all help, but accidents still happen. A general liability insurance policy will cover any physical damage caused by the company and fill the gaps where best practices fail.
Technology Glitch / Professional Service Failure
Service Failures can affect these startups in a couple ways: technology glitches and service glitches.
A tech product failure occurs when consumers can’t use the company’s services due to a bug or glitch with the tech product (mobile or web app). In our dry cleaning example, a glitch in the app accepts payment but for some reason fails to load the new orders into the system. The company never picks up their clothes and now they’re furious AND they don’t have their money back yet. This glitch can cause a laundry list of claims and expenses (pun intended).
The other type of failure is failure of the service itself. This happens when the company fails to meet all contractual terms to which it has agreed. This is the equivalent of returning dirty laundry to a customer or failing to abide to the company’s refund policy when the customer complained about the error. Sometimes these terms don’t even have to be explicit…certain warranties are implied in customer contracts.
You can do plenty of things to mitigate these service failure risks and reduce damages, but the fact is that claims can still arise from overzealous customers and partners. A broadly worded errors and omissions insurance policy will help cover all of these costs.
Leveraging technology in the form of web/mobile apps allow customers to access the company’s services with the tap of a finger. Collecting data about customers – identity, in-app behavior, purchase history – helps the on-demand service company business model to flourish by creating an amazing user experience.
As such, these companies are particularly prone to high cost data breach exposures. The theft/leak of customer info can result in an abundance of costs, including class action lawsuits, breach nofication costs, forensic costs, data restoration costs, lost revenue due to operational downtime, and more. Note that most of these breaches are not due to malicious hackers or viruses…they occur from simple accidents.
This is where a cyber liability insurance policy comes in to protect your company and mitigate this exposure. A good cyber policy will provide coverage for all the risks listed above and more.
It’s undeniable that companies in this space will face these risks. If you want to learn more about getting your company covered and kicking these worries to the curb, reach out to us any time at email@example.com at any time.
image via wired