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Alternative Routes: Tiny Homes, Sharing Economy Drive Change for RV Industry

As many of your personal lines clients dust off their travel trailers and motor homes for a road trip or a weekend at the lake, make sure you talk to them about two emerging trends that could affect their insurance coverage.
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It was a long, harsh winter, but temperatures are finally climbing all over the country—and camping season is close behind.

Between late spring and early fall, many of your personal lines clients will probably dust off their travel trailers and motor homes for a road trip or a weekend at the lake. With more RVs on the road this year, make sure you talk to your clients about two emerging trends that could affect their insurance coverage:

1) Tiny homes. Steven Preston, national RV product lead at Foremost, says tiny homes generally fall into two categories: standard models built by a Recreational Vehicle Industry Association (RVIA) tiny house builder, which “fit in with the travel trailer program perfectly,” he says; and custom units.

Developing and securing adequate coverage for the latter type of tiny home “is very dependent on the specific unit, and that’s what makes creating generalized insurance guidelines so hard,” says Ariel Menkin, RV product manager at Progressive. “No tiny home is like the next.”

With a custom tiny home, failing to secure certification from the RVIA or the National Organization of Alternative Housing, Inc. “is the quickest way to get turned down” for an RV insurance policy, Preston says. “When you walk into a factory where they’re building standard travel trailers and putting out a dozen or two dozen a day, there’s not a lot of question about the process. But when you have some of these tiny homes where someone is building it over six months on the weekend, there aren’t a lot of standards.”

“A certification doesn’t guarantee coverage,” Preston adds. “But a certified unit is more likely to be built to the standards we would want to see, so that’s the minimum we would look for.”

Assuming a custom tiny homeowner can get their specs up to snuff, however, valuation remains a challenge for many insurers. “You have an individual who’s pouring their heart and soul into this thing—it’s their passion project. This is their baby,” Preston explains. “They’re seeing the time they spent on it and the effort they put into it. When they think it’s valued at $120,000 but we see the value closer to $50,000, that’s a tough conversation to have.”

And remember: If you have a client who’s planning on living in their tiny home full-time, “an RV policy would provide coverage for the policyholder at the premises where that tiny home is parked, but it would not provide comprehensive personal liability or worldwide liability,” cautions Brook McGuire, strategy lead for specialty products at Safeco. “We highly recommend a personal umbrella policy for customers with tiny homes to avoid extra coverage gaps.”

2) Sharing economy. According to Outdoorsy, an Airbnb-like sharing marketplace that caters specifically to RVers, over 17 million RVs in North America sit unused 350 days a year—and RV owners could make up to an astonishing $86,000 a year renting out their vehicles to their peers.

Especially as Gen Xers and millennials continue to change the demographics of the RVing community, “we’re hearing more and more about the desire for sharing economy solutions,” McGuire says. “RVs lend themselves well to that type of market because they’re often just sitting at home or in a storage lot, depreciating and developing leaks. It’s a growing demand among consumers, and it’s on our list of program updates to make.”

Foremost, too, is “definitely hearing an increased demand for RV sharing,” Preston confirms. But the challenge from an insurance standpoint “is not only that when you’re constantly renting out the unit, the usage goes up significantly, but also that it’s now being driven by someone who might not understand how to pull a travel trailer, or might not be used to driving a motorhome. That means the exposure is much greater.”

Unlike in the home-sharing space, there are no coverage solutions currently available to cover RV sharing, with the exception of the limited insurance options provided by the sharing companies themselves. That coverage tends to include “property damage for the RV while it’s being rented,” McGuire says, “but I would think an even bigger concern would be around liability. Who provides that liability coverage? The traditional RV policy would not respond because it’s being used commercially at that point. A lot of customers may not have contemplated the potential liability risk there.”

Eventually, McGuire expects RV carriers to follow the lead of homeowners insurers in developing endorsements that cover the commercial exposure of RV sharing—for an additional premium, of course. “On the liability side, it’s a fair amount of risk you’re taking on,” she points out.

“I would venture to guess that at some point a solution’s going to be out there,” Preston agrees. “But evaluating it is going to be a long-term thing, and then how do you price it? Right now, we simply don’t have enough data to be able to price it accurately.”

Jacquelyn Connelly is IA senior editor.