Protecting the gig economy: An opportunity for insurers to do more?
20 Apr 2020
With the growth of the gig economy, we look at the challenges for workers in this sector to access traditional protection and what the insurance industry could do to better meet their needs through product development and distribution.
Digitalisation of the economy has changed the way we live and work. With a boom in digital platforms such as Amazon, Deliveroo and Uber, the number of gig workers has doubled over the past 3 years. From video animators to delivery drivers, government research shows there are roughly 2.8m gig workers in Britain. This includes people who have a traditional full-time job and do additional gig works to top up income, as well as those for whom the money earned from the gig economy is their main source of income. Whilst gig workers enjoy the independence and flexibility of work, many are missing out on workers’ rights such as sick leave and holiday pay.
Difficulties for gig workers accessing protection
Gig workers are not entitled to statutory sick pay, and while they can access Universal Credit like others, it leaves a gap and relies on gig workers to put in place their own safety net. However, there are some challenges for gig workers buying protection.
People involved in the gig economy are generally younger, 91% of gig workers are aged under 55, compared to 61% in the general population. 56% of the gig economy are between 18-34, the age when savings are relatively low, and protection is most needed. The COVID-19 pandemic has also highlighted the low financial resilience of many self-employed people across the UK. Research shows 45% of gig workers state that income from gig work is an important source of income for them. These gig workers may need their income protected, but the nature of their work has posed some barriers to obtain protection insurance.
42% of gig workers provide courier services, followed by transport services (28%) and food delivery (21%) with an average income of £8.25 per hour. Couriers and food delivery drivers normally have zero-hour contracts, and the hours they work per week fluctuates depending on demand. For example, on average, Deliveroo riders work less than 15 hours a week, with demand peaking during Friday and weekend evenings. They can also choose to work from as little as 1 hour per week. Therefore, it is hard to quantify a regular number of hours worked for gig workers. Traditional income protection insures workers with a minimum of 16 hours per week, and so this is a barrier for gig workers applying for protection.
Frequent job hopping, or multiple jobs introduces further barriers for gig workers to seek out insurance. 67% of gig workers claimed they would have a number of different jobs in their working life . Those who engage in full time gig jobs often work on different gigs from several platforms at the same time. A translator can work during weekdays and drive for Uber at the weekend when the demand is high. They also have varied forms of income. Unlike most salaried workers who get paid monthly, some freelancers will get a one-off payment when the job is finished, and others may get a fixed hourly pay. Salaries may be paid via digital platforms, bank transfer or cash, making it harder to provide consistent proof of income in order to apply for protection insurance.
What’s been happening in the market
In the General Insurance market, ZEGO is one example of a product provider which is adapting to the needs of gig workers. With a policy term as short as 30 days and a flexible pay-as-you-go payment design feature, ZEGO provides car insurance to suit the needs for couriers, private hire and delivery drivers.
Collective Benefit is pioneering protection for freelancers and the self-employed, with a pre-designed Time Off Work bundle covering sick pay and compassionate leave, and a Wellness bundle providing private medical insurance and a digital GP service. Thereby providing benefits that would only normally be available to employed workers.
Deliveroo, the large employer of gig workers, also provides insurance for all riders through cyclist insurer Bikmo. On top of bodily injury and public liability insurance, Deliveroo riders are covered for loss of income for up to 30 days, if they are kept off the road due to an injury that happened at work.
How can insurers better serve these customers?
In order to serve this new and flexible model of working in the gig economy, insurers can consider changing product design, underwriting criteria and distribution channels, to help close the protection gap for this growing section of workers.
The way gig workers find their jobs has transformed, moving from traditional job agencies to online and via apps. Protection insurers can consider marketing or distributing through some of the most commonly used apps, such as Uber, AmazonFlex and PeoplePerHour.
While gig workers are satisfied with their independence and flexibility, one in four gig workers were dissatisfied with work-related benefits. When asked which aspects of work they want to improve on, work-related benefits outweigh better job security and training opportunities. According to Hymans Robertson’s own research, 64% of gig workers agree that they will choose an employer that positively contributes to their wellbeing . This indicates there is real value in employers of gig worker adding to the benefits they offer to differentiate themselves and help attract and retain staff. It also presents an opportunity for insurers to develop group benefits aimed at this market.
In terms of product innovation, a simple pay-as-you-go product with short term cover could be more suitable for gig workers than traditional individual long-term protection products. Flexibility is also important with features such as the ability to vary the income level to be covered without further underwriting when customers change jobs or when multiple gigs are performed. Products designed to plug gaps like Statutory Sick Pay could also appeal to gig workers who want to replace what they would get from full time employment.
The gig economy is a growing market and there is a significant opportunity to better protect gig workers through innovation in products and distribution. If you would like to discuss your product development plans or any of the issues in this article, one of our consultants would be happy to discuss with you.