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How is the gig economy impacting insurance?

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The gig economy refers to a way of working characterised by flexible, short-term contracts. It's a buzzword that usually evokes images of Uber drivers or Deliveroo riders, symbols of a new way of getting around, making purchases, working and hiring.

Since the pandemic, the gig economy has grown - but it's not clear how much it's grown. According to the TUC in 2021, 14.7% of working people in England and Wales are in the gig economy. This is a number that's tripled in the previous 5 years, and is only expected to rise further.

Gig economy workers have different insurance needs to salaried workers. For example, delivery drivers won't be covered by their personal car insurance policy. Likewise, they could benefit from income protection, as gig workers won't have safety net employee benefits like company sick pay.

So, what challenges does the gig economy raise for the insurance industry? And what can insurers do to meet the needs of gig workers? These are the questions I consider in this article.

I define the gig economy as any work that's characterised by short-term engagements or part-time freelance positions. Typically, gig workers won't have a permanent contract or any traditional employment rights.

For many workers, this arrangement comes with its perks. Workers have the flexibility to decide how much they work and when, and they have access to cash quickly. Yet it's an arrangement that often attracts criticism. For example, a study published in The Guardian found many gig workers experienced job insecurity, precarity, and low pay.

According to the CIPD's 2023 research, 40% of the gig economy are people working in delivery or ride sharing:

  • Food delivery: 18%
  • Couriers: 12%
  • Private hire drivers: 11%

The remaining 60% is made up of a mix of other roles. Many of these involve deskwork, such as data entry, writing or design. Meanwhile, the gig economy also includes babysitting, cleaning or dog walking jobs.

Most people aren't working in the gig economy full-time. Instead, they're supplementing other income with an occasional 'gig'.

According to the TUC's analysis from 2021, 53.2% of people in the gig economy say that this type of work makes up less than 25% of their income. Only 18.3% said it made up 75-100% of their income.

In many cases, people are taking on this extra work due to the pressures of the cost of living crisis. As many as 1.2 million people now have second jobs, according to data from the Office for National Statistics. While they won't all be in the gig economy, a significant proportion of them are.

There are many different people, situations, and jobs in this economy. The challenge for the insurance market is providing insurance products that fit all of these different needs. One place to start could be by satisfying the need for flexible, temporary cover.

What impact does the growing trend toward flexibility and short-term work have on the insurance industry? There are 3 key themes:

1. Many workers are going underinsured

According to a study from GlobalData, nearly 25% of consumers surveyed hadn't considered they would need insurance to cover them when carrying out a second job. Around 12% had considered taking out insurance, but had ultimately decided against it.

The evidence suggests that many workers may not have the cover they need when making deliveries, driving passengers, or performing other tasks in the gig economy.

A more complex problem may be that workers think they're insured, but may not have the full cover for the specific work they're performing. For instance, many gig workers may be driving passengers in their personal vehicles, not knowing they're uninsured, as personal motor insurance won't cover this work.

Anyone who uses a car or van for gig work must have cover for 'carriage of goods for hire and reward' via a commercial motor policy. That's alongside public liability insurance.

Meanwhile, ride-share drivers need private hire insurance - which many don't have. In 2019, Uber lost its licence to operate in London for this reason, with 14,000 trips believed to be uninsured.

Underinsurance poses a major risk to gig workers. Not only do they face potential legal action if they're ever in an accident, but they have to pay for any damages themselves.

The point remains that many workers don't know that they need special insurance. And that's not just a problem for them, but for the insurance industry too.

Read more about how insurers can increase accessibility for the uninsured.

2. New work habits demand more flexible insurance policies

With a growing number of gig workers in the UK, demand for gig insurance is growing. Part of this is because gig companies are asking workers to confirm if they have the right car insurance before they take on work.

However, it's not easy for workers to find the insurance products that make sense for them. Because most gig workers are only supplementing their income, they might be reluctant to spend money on full-time cover.

Some car insurance companies are already responding to the demand for more flexible, short-term policies. For example, some are offering general liability cover on a pay-as-you-go (PAYG) basis. This is specifically aimed at helping people "find appropriate cover if they want to do a couple of hours on the side".

It's not just for delivery drivers. Rather, it's designed for cleaners, babysitters, and other freelancers who need insurance solutions on a flexible basis.

Yet, this flexible, short-term insurance product is not a standard policy. As such, many gig workers may not know they exist at all - and may be overspending or choosing to go uninsured.

Plus, if gig workers want to have the security that's typically enjoyed by conventional employees, they may need other insurance products on a flexible basis too. For example, they may benefit from income protection or life insurance for peace of mind.

3. The regulatory environment remains unsettled, and gig workers may face changes just around the corner

Regulation continues to affect both those workers who are taking out insurance and the insurers who want to offer more flexible policies.

The gig economy has questioned the fundamental assumptions about where the responsibility lies for protecting workers. Namely, are workers responsible as independent contractors? Should the companies that hire the workers be responsible? Or is it down to insurers?

This is a question for regulators to answer. But right now, the onus is on gig workers to find the protection they need through insurance policies - but that might change at a moment's notice.

The UK's Supreme Court recently upheld a ruling that gig workers are self-employed. This means that companies aren't required to provide them sick pay or bargaining rights. Yet this is likely to be appealed.

Meanwhile, in the EU, the European Council is debating whether to grant gig workers employment rights. If this gets the go-ahead and these workers are protected with sick days, for instance, they may not need to take out an income protection policy.

As it stands now, some companies do offer insurance products to their gig workers. For example, Deliveroo provides insurance for all riders through cyclist insurer Bikmo. On top of bodily injury and professional liability insurance, riders are covered for loss of income up to 30 days if they have a work-related injury. Yet it's not something offered by all gig platforms, and there's no industry standard.

The unsettled regulatory environment poses its own challenges for insurers too. It's not clear what kinds of products to develop and offer, as they may soon be obsolete. At a time when insurers aren't making large profits due to inflation, the risk of developing these products may be too resource-intensive.

Ultimately, it's unlikely that we're going to have certainty any time soon. However, there are ways that the insurance industry can adapt to the gig economy in the meantime.

There's a big risk that gig workers are going unprotected, particularly with car insurance. So, what can the insurance industry do to help workers and benefit from the growing market?

1. Insurers and PCWs can educate gig workers about the cover they need

Gig workers might not know what type of insurance they need.

It's not practical for insurance companies to provide bespoke products for every different type of gig worker. But insurers can give information on what products a gig worker might need.

For example, they can warn drivers that standard motor insurance doesn't cover rideshare work. The insurer could give this information when the driver is getting a quote or about to buy the policy.

If a customer looks for personal motor insurance, a price comparison website (PCW) could clearly state that it doesn't cover commercial use. If a customer's applying for motor insurance and they're a delivery driver, insurers could highlight what the policy covers and its exclusions.

At the same time, insurers could market their policies to gig workers through the platforms where they access work. For instance, insurers could partner with the likes of Fiverr - a freelancer platform. That's exactly what Stride Health, a web-based insurance recommendation platform for independent workers, has done in the US.

This way, workers get coverage conveniently through the platform that they're using, while insurers have easier access to this market.

2. Insurers can provide more flexible insurance policies for gig workers

There's no single type of 'gig worker', and so there can be no single 'gig economy insurance'.

But all gig workers could benefit from a more flexible insurance policy. If someone decides to drive for a rideshare company for 3 months, it doesn't make sense for them to take out a 12-month policy from a traditional insurer. They can always edit their policy to remove this - but this might not be obvious to a consumer, and it's a clunky process.

Instead, gig economy drivers could be better suited to pay-per-mile insurance that covers commercial driving. This means they'd only pay for commercial insurance coverage when they're driving for work.

Similarly, some insurers are offering PAYG public liabilities cover, that can be easily adjusted based on the current jobs the worker is doing.

Insurers could also consider offering packages of protections specifically for the gig economy workers. For example, Collective Benefits (now Onsi) once offered pioneering protections for self-employed workers. This included a pre-designed 'Time Off Work' bundle, covering sick pay and compassionate leave. These are all existing individual insurance products but packaged in a consumer-friendly and easy-to-understand way.

As a PCW, we help both insurers and consumers at Confused.com. There's plenty that we do to ensure that everyone has the coverage they need, including in the gig economy.

Firstly, we work hard to ensure we get the best, most relevant deals in front of our customers. That means aggregating deals from across the industry and providing a platform for as many different policies and insurance providers as possible. We're continuing to extend the diversity of policies available through our platform by inviting new insurers to our panel.

Specifically, we're inviting insurers who offer flexible insurance policies to our panel. This way, we can ensure that gig workers can find the right cover for them.

We also have a role in educating consumers. We regularly publish content and make media appearances about trends and changes in the insurance industry. As the industry develops - and new regulation becomes relevant in the world of work - it's something that continues to be important for all consumers.

Read more about how we use a product steering committee to remain customer-centric.

The gig economy is changing the world of work. And for insurers to provide the right cover for gig workers, they may need to get creative with the types of products they offer.

One type of product to consider is flexible policies, which could cover just the hours they work. This way, workers would avoid the risk of being uninsured, while insurers can access a new market.

To stay in the loop about how the industry is adapting, learn more about what we do at Confused.com.

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