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Senate moves to regulate online marketplace guarantees after insurers warn product may be insurance
Summary
Senators passed a bill creating a regulatory framework for online marketplace "guarantees" (examples: Airbnb host guarantees). Insurers and trade associations urged patience and national coordination, saying the transactions resemble insurance and should be regulated accordingly; proponents said Arkansas needs clear rules now.
The Senate Insurance & Commerce Committee approved a bill establishing state rules for online marketplace guarantees — the type of protection platforms such as Airbnb provide hosts when guests damage property.
Sen. Justin Boyd, presenting the bill, said it "simply establishes a regulatory framework for online marketplace guarantees" and seeks to define the difference between guarantees and insurance. Proponents argued guarantees typically are incidental to the platform’s business model and not actuarially underwritten insurance products.
Representatives from Airbnb described the guarantees as a low-frequency, low-dollar protection that fills a gap when a guest does not reimburse a host for damage. "In the event ... there is damage and the guest does not fulfill their obligation to pay you back, Airbnb guarantees the host will pay that damage and then will decide how or whether to continue pursuing that guest to pay for those damages," an Airbnb lawyer told the committee.
Insurance trade groups, however, urged caution. Ward Tisdale of the National Association of Mutual Insurance Companies told senators a recent memo from the Wisconsin insurance department concluded that some marketplace guarantees are insurance because they transfer the risk of loss in exchange for a price. Katie Burns of the American Property Casualty Insurance Association (APCIA) said the industry is negotiating national model language at NCOIL and with other stakeholders and that Arkansas should wait for a model act to emerge.
Insurance Commissioner Al McClain told the committee the department had reviewed the bill but had not taken a formal position and that, were the legislature to adopt this framework, the department would implement and could exercise its rulemaking authority.
Committee members questioned whether registration with the insurance commissioner in the bill would effectively amount to insurance regulation. Industry witnesses said registration is not the same as being a licensed insurer and warned that inconsistent state approaches could create regulatory arbitrage.
After discussion, Sen. Boyd moved passage; Sen. McKee seconded. The committee approved the bill on a voice vote. Several industry groups said they plan to continue national negotiations on model language.
