Across the world, the freelance – or gig – economy is booming, but the flexibility of job-to-job work can come at a cost; the self-employed are increasingly underinsured and financially insecure.
Both insurers and insurtech start-ups are taking notice and action. Insurance companies are developing customized, pay-as-you-go product designs, more flexible underwriting criteria, and more sophisticated, digital distribution channels to adapt to a changing workforce model. In addition, a range of global insurers have teamed up with tech giants to bring income protection, medical care, disability, and hospital cash policies to self-employed workers.
Gig work – defined as independent contracting for online platform companies or ad-hoc freelancing – is growing. McKinsey & Company estimates that gig workers could comprise as much as 20-30%1 of the U.S. and European Union 15 (EU-15) workforce, and worldwide the popularity of this form of labor is increasing:
The pandemic has only highlighted the importance – and vulnerability – of these workers. While it may be premature to draw a complete picture of the impact of pandemic on the gig economy, previous research suggests that recessionary disruptions, such as layoffs and furloughs, can push many into self-employment, yet also increase competition and drive down earnings. Early studies on the short-term effects of the pandemic in the U.K. indicate that the self-employed were more likely to have suffered a fall in hours and earnings.5
A recent survey by research group Cake and Arrow6 found that gig workers largely have no access to paid sick leave, employee-sponsored health insurance, workers’ compensation, or disability insurance. Gig workers responding to the Cake and Arrow survey reported that they lacked an emergency fund and were unable to pay for expenses or support themselves in the event of a medical emergency, or to afford long-term care after a disabling injury. At the same time, many perform essential public services, including courier, transport, and food delivery roles that increase their exposure to SARS-CoV-2.
In short, the COVID-19 crisis only underscores the downsides of being your own boss: the absence of paid sick leave, worker’s compensation, or income protection. Satisfying this need has become particularly urgent amid an ongoing pandemic, leading to the introduction of paid sick leave policies from major gig companies such as Instacart and Uber. In India this trend has become pronounced; tech and e-commerce companies such as Flipkart, Zomato, Swiggy, BigBasket, and Amazon India have started offering insurance coverage and income protection plans for their delivery partners, local vendors, and supply chain associates.
Partnerships between technology platforms and insurers are emerging to respond to the needs of the gig worker. For example, the digital insurer Acko General Insurance in India partnered with the Shadowfax logistics platform to provide medical insurance options to Shadowfax delivery partners for the period that they are performing gigs for the logistics company.
Unions have also entered the market: Alia is a novel U.S. benefit program launched by the National Domestic Workers Alliance for housecleaners in 2019. Employers usually pay $5 per cleaning into a benefits fund. All cleaners can draw on the fund for paid time-off, and those in California and New York can also purchase accident, critical illness, life or disability insurance through the fund.
While insurers have been slow to develop individual protection products that cater to the gig economy, some powerful examples are emerging:
Start-ups are also stepping-in to help solve the problem of underinsurance. Insurtechs have joined forces with incumbents to offer flexible coverage that can be turned “on” or “off” on demand and by job, based on the freelancer’s unpredictable schedule. For example in Canada, Duuo, a new on-demand digital insurance brand from The Co-operators Group, recently launched a new gig liability product based on a per-day rate. In the U.K., the insurtech Dinghy has partnered with Allianz to launch pay-as-you-go business coverage for freelancers in which customers pay by the second through an app. Similarly, the start-up SNACK offers microinsurance policies for critical illness, personal accident, or term life coverage to employees of the ride-hailing service Grab in Asia; customers can accumulate bite-sized premiums of S$0.30, S$0.50, or S$0.70 linked to daily activities such as travelling via public transport, working out, or ordering a meal.
A single unexpected medical expense can be financially devastating without employer-sponsored medical coverage, yet very employers few directly subsidize health insurance for gig workers. One such organization is the Indian home services marketplace Urban Company, which does subsidize health insurance for its gig workers in the event of hospitalization for COVID-19.
New models are emerging to bridge this protection gap. Some insurtechs offer health services via a membership fee; others create systems to encourage freelancers to save in order to afford benefits. In India the GIGI membership costs 99 rupees per year and covers expenses for in-patient and outpatient care and hospitalization. Similarly, the insurtech Alan became the first startup in France to obtain an official health insurance license in 30 years and targets that country’s growing freelancer community with digital health products and telehealth offerings. Other entrants take a more direct approach: Livelli, a Canadian start-up, offers freelancers the Manulife life and health dental coverage typically accessible through employer-sponsored benefit plans.
On-demand health insurance programs have grown particularly popular:
Disability coverage for gig workers also may represent another opportunity for insurance product innovation. According to research by LIMRA, 90% of gig workers lack disability insurance, yet half of the U.S. self-employed shared an interest in purchasing affordable coverage. LIMRA also found that more than two-thirds of all gig workers in Asia and Latin America would purchase cover if offered an affordable plan.
A range of new market offerings are meeting the insurance demand of gig workers. For example, the U.S.-based CareerGig software-as-a-service (SaaS) platform offers affordable disability insurance targeting freelancers. At the same time, gig companies such as Shadowfax are offering accidental death and disability insurance coverage to workers accepting job assignments through their apps.
Such product innovation reflects the growing scale and influence of the gig economy – as well as the lure of an underserved market. Increasingly, innovative incumbent insurers and new industry entrants are responding to the needs of this growing, highly independent segment of the labor force. At RGA, we are eager to speak with clients to discuss demographic insights, workforce changes, or new technologies.
