How has Covid-19 impacted on insurance for the short-term rental sector?

UK: Louise Birritteri, CEO and founder of sharing economy insurance specialist Pikl, discusses the impact of Covid-19 on insurance for the short-term rental sector, as well as the wider considerations for the industry.

The short-term accommodation sector was severely hit by the Covid-19 outbreak. Bookings across the industry are estimated to have dropped by up to 90 per cent during Q2 2020.

However, since the market reopened on 4 July, there has been much excitement and a significant surge of bookings for many.

Staycations in short-term rentals provide the perfect opportunity for a much-needed holiday whilst still being able to socially distance, and many will be looking to do this in rural locations.

At Pikl, we have always focused our insurance products on giving the most cost-effective deal to our customers, whether that is our usage-based insurance products where you just pay insurance for each booking or one of our annual products.

Our usage-based insurance saw a significant drop during April to June. However, we still saw demand for our annual products, where property owners recognised they still needed their underlying insurance to be in place to protect their property from a flood or fire for example.

As a team, we used lockdown to refocus our energy into these products in the short-term and accelerated our plans to launch products for the vehicle sharing market later this year. And, we are really pleased to have seen a massive spike in demand for Pikl’s short-term rental products in July.

Covid-19 has given the short-term rental market and supporting insurance industry a lot to think about:

This has caused much discussion over recent weeks around cleaning protocols and processes. The UK Short-Term Accommodation Association [STAA] has put together some very helpful information on this.

We, along with the whole insurance industry, have been considering the implications for our products, for example:

  • The host’s liability for transmission of Covid-19 to a guest staying at the property
  • Cancellation or business interruption cover for bookings which cannot be fulfilled due to a government lockdown or overstaying guests who have Covid-19.

Both of these risks are not currently covered by the majority of insurance policies.

This is something which is being reviewed by both insurers and reinsurers, but it will take some time to be considered. In particular, there are a number of court cases currently being progressed for business interruption claims due to the government lockdown and this is likely to significantly influence the approach the insurance market takes for considering cover in this space. It is unlikely insurance cover will alter in the near term until these court cases are resolved.

​The best course of action for hosts is to take as many steps as possible to reduce the risk of Covid-19 transmission at their properties.

As well as considering thorough cleaning protocols, they need to think about other potential financial risks. I have a few simple suggestions which may help:

  • Security checks: Many people have decided to opt to use a contactless key exchange. Whilst there are many providers with great solutions for this, its important not to overlook the added security a physical key exchange provides. It allows hosts to meet their guests and know they are who they say they are. Remember to check their IDs and, if they have sent you copies of documents in advance, then consider having a quick video call with them as a virtual “meet and greet” before you give them the security code for the keys.
  • Monitor longer stays: Traditionally very short stays, such as a single night, should be treated with caution. There is a greater frequency of malicious damage from these types of bookings. However, with less pressure on people going into their workplace at the moment, people are now looking to take longer stays. These longer stays can also come with increased risk in the current environment. With the frequency of cleaning reduced, it may make it harder to monitor the behaviour of longer stay guests, so hosts should stay vigilant and consider arranging agreed times to visit the property when the guests are out so that they can inspect it and enable cleaning to be done safely.
  • Get insured: This crisis has highlighted what an effect circumstances beyond your control can have upon your business, which has caused a severe negative financial impact for many. However, severe risk is not confined to extraordinary events like the current pandemic; an incident like a fire at a rental property could equally have as much impact on people’s business. I am always saddened that so many people operating a business do not mitigate these risks by having the right insurance in place. Hosts should get specific insurance that cover their short-letting activities. Conventional home and landlord insurance do not provide this cover so hosts may find they have an unwelcome gap in cover if a guest damages anything, causes a fire, leaves their property open to theft or suffers a serious injury that could leave the hosts liable to serious financial loss. It’s for exactly these circumstances that Pikl’s insurance is designed for.

At Pikl, we love to talk to short-term rental operators and are always happy to help you put in place the right insurance for your short-let business.