Reimagining Insurance for the Gig Economy | Episode 5

Jennifer Smith: Hello and welcome to the Sapiens Insurance 360 podcast. I’m your host, Jennifer Smith, Vice President of Product Strategy for our Life and Annuity Division. And I’m so excited that you’re out there listening. This is where we discuss the latest news, trends, and issues from across the insurance solutions and technology spectrum. And today, we have a very special guest, Cheryle Tuttle, who is one of Sapiens’ Vice Presidents in property, casualty, and workers’ comp in North America. Cheryle has over 20 years of experience in the P&C sector, with significant experience in selling and delivering enterprise software for claims, policy administration, underwriting, cloud and insurance operations. Today we’ll be discussing reimagining insurance for the gig economy. And Cheryle, welcome to the program. 

Cheryle Tuttle: Thanks, Jennifer. Great to be here. 

Jennifer Smith: So let’s begin with a topic here that is near and dear to many of us. Prior to and definitely during the COVID pandemic, many full-time workers began to willingly or not reevaluate their work situation, including their need for better work-life balance. With many ultimately leaving full-time work to pursue gig work. To clarify, gig work has evolved to become an entire economy comprised of part-time consulting and freelance jobs, based on a fixed-term or pay-per-project basis, after gaining traction during the latest recession, when pioneering startups like Lyft, GrubHub, Uber Eats, and TaskRabbit hired individuals looking for short but steady stints of work. Today’s economy includes roughly 30 million workers in the U.S. Profits are expected to reach $455 billion by the end of 2023, as flexible work models have become more acceptable and continue to attract workers of all ages who prefer to set their own schedules. But the challenge for gig workers and employers alike is the lack of affordable health care, life insurance, 401k-type savings plans, and other work perks. Employee benefits and workers’ comp products have also been unavailable for gig workers. However, with gig workers now a fixture of the U.S. workforce, established carriers and startup insurtechs have expressed interest in developing solutions for this untapped market. So, Cheryle, what impact does the gig economy have on traditional workers’ comp models, and how can those models be adapted to address the changing nature in work? 

Cheryle Tuttle: The gig economy and the use of technology have significant impact on traditional worker’s comp models. Some of the key impacts that I’ve seen are shifting employee relationships. In the gig economy, workers are often classified as independent contractors rather than employees, which means they are not typically covered by workers’ comp traditional programs. This creates a gap for workers who face occupational hazards or injuries To address this, policymakers consider expanding workers’ comp laws to include independent contractors or explore alternative models. Fragmented work arrangements as gig workers engage in multiple short-term jobs, making it difficult to assign liability for injuries. One possible adaption that we’ve seen is the creation of portable work comps systems that allow the workers across different gigs and provide coverage, regardless of a specific job, which, of course that’s not in our traditional models. 

Income instability is something that gig workers face as they often experience irregular income streams and make it difficult for carriers to determine wage replacement, which is what workers’ comp is all about. Adapting models could involve considering alternative methods for calculating these benefits. This could also include using mobile apps for payroll reporting on a more frequent basis. This includes enhanced data collection, such as work hours, tasks performed, and potential risks they face. The more data, the more accurate, targeted models for programs can be created, thus offered to these workers. 

Jennifer Smith: Yeah, absolutely. Cheryle, thanks. You know, I also pulled some statistics on the matter, and we really are seeing a growth in the gig economy workers. At the beginning of the year, more than a third of U.S. workers, which works out to being about 36%, participate in the gig economy and 52% of workers participating in the gig economy lost their jobs because of COVID 19, which I thought was pretty interesting. So it’s not like people have necessarily chosen this right out of the gate. More than 90% of U.S. employer-based workers would consider freelancing or doing independent contract work, which indicates that gig work is going to increase. 57% of contract workers work more than 40 hours per week, so they are in stable jobs. However, they are also earning up to 58% less than full-time employees. So there’s still a gap in income. And according to a statement by Prudential, more than half of the independent gig workers out there do not have access to employer-provided benefits. And those that do, only have it through a spouse or through a professional association. So that gives many the access to medical insurance and dental, but only about 20% of gig workers have life insurance, and a shockingly low number of 5% have access to short-term disability. So should anything happen to them, they’ve got no way to replace their income stream. This really worries me for the future. It’s projected that by the end of this year, more than half of the U.S. workforce either will be or has been part of the gig economy. So we’re not getting away from this and we need to try and figure out more ways to support the gig economy. 

So to continue, let’s talk about this “why” a little bit more? You know, what are some of the challenges that gig workers experience in purchasing insurance to protect themselves and their loved ones in the case of a major health crisis, disability, or the death of the worker? 

Cheryle Tuttle: Well, those are some interesting statistics. I hadn’t heard actual numbers around that. As you said, times are changing and more and more people are becoming gig workers, which does open up new challenges for workers. One example is limited availability, especially with workers’ comp typically offered by employers to their employees, which means gig workers, independent contractors may not have easy access for this coverage because their jobs can change. In addition, workers’ comp insurance can be costly and put a financial burden on purchasing it on their own. This is especially true in low-income or part-time gigs we see. A lot of these folks are required to carry workers’ comp coverage, yet they don’t understand the complex application process, have limited coverage options, and/ or exclusions from traditional coverage, which we all know, even the traditional coverage is very complex. In addition, there’s a major lack of knowledge and understanding of the importance of having these types of insurances such as workers’ comp and even accidental and disability insurance. And I’m sure, Jen, you see this in the life and disability market as well, correct? 

Jennifer Smith: Absolutely. We definitely see, you know, especially that lack of knowledge and understanding of the importance of having the coverage. You know, people need to protect themselves and they need to protect their families. But, you know, we definitely also see challenges simply because of the way that, you know, life and disability insurance risk is evaluated. So even applying for it, if they do see the need, applying for it becomes a challenge. Life and disability insurance products are priced based on several assumptions and risk criteria. And one key factor for evaluating risk when applying for live coverage is that you have a job and a steady income, so your policy doesn’t lapse. And obviously, there’s other risk factors like age and health, etc. and that’s also evaluated. But [if] any of those levers indicate a higher risk, then the applicant is typically declined or rated at a higher premium. So then that creates a new issue because, you know, as I mentioned earlier, on average, gig workers earn about 50% less than full-time employees. So as it is, they’ll have a hard time to afford regular life and disability premiums, let alone a higher rate of premiums. So with the large number of workers making less money, they’re going to struggle with those high premiums. They’re going to cover themselves, and they’re also going to have a strain on savings and being able to save for 401ks and retirement. With the lower wage earner, the inability to have that extra money to put into retirement savings, you know, is going to put a huge burden on the whole economy coming into the future. So, you know, that all being said, I haven’t lost hope yet. So in any case, Cheryle, how are you seeing insurers reimagining benefits for the gig economy?

Cheryle Tuttle: Jen, things are changing in the traditional market and it’s no different with gig workers. Insurers are rethinking benefits for gig workers by reorganizing their unique needs and challenges they face. In the insurance market, they have to be thinking differently because more workers are becoming gig workers. So what are they doing? How are they addressing these needs? One option that they’re doing is flexible coverage options. Insurers are offering flexible coverage options that allow the gig workers to customize their insurance plans based on their specific needs and preferences. This includes different options such as health, accident, disability, and, of course, workers’ comp. On-demand coverage, this is critical. Insurers are providing on-demand coverage that allows coverage that gig workers can activate and deactivate as needed. We don’t see that in the traditional market. This allows them to pay for insurance when they’re actively working, and reduce the financial burden of maintaining that coverage during periods of inactivity. As gig workers often have flexible schedules and may only work intermittently, traditional plays just don’t work. Gig workers’ ability to purchase coverage for specific periods of time and only pay for coverage on working. This can be further expanded to include dynamic pricing models. Traditional coverage is typically based on industry classifications and historical data. However, the gig economy often involves a wide range of job types and risk levels. Implementing that dynamic pricing model allows access [to] risk-based individual gig workers activities and performance, which can help ensure that the premiums accurately reflect the level of risk of the worker, and that specific job. Another area is portable benefits. Plans are being developed for portable benefits that allow gig workers [to] carry with them from job to job. This ensures that gig workers have continuous coverage when they switch between gig platforms or multiple jobs, even simultaneously, in accessible and affordable plans. Designing benefit plans that are accessible and affordable is key here, Jen. 

Jennifer Smith: Great points, Cheryle. So we’re running out of time. Last question. How is marketing different for insurance companies selling to cover gig workers? And what part does technology play in that? 

Cheryle Tuttle: Oh, this requires insurance companies to understand their unique needs, preferences, and challenges. Some of the ways it differs from the traditional marketing approach and the role technology plays is for sure, different targeted messages to provide messages that specifically address the concerns and risks faced by gig workers. This includes highlighting benefits and [the] importance of workers’ comp and disability insurance for their specific line of work and emphasizing how important it is to protect them and their family. Digital platforms. Since gig workers are often tech savvy as we know and rely heavily on digital platforms for their work, insurance companies must leverage technology to reach and engage them. This can include targeted online ads, social media marketing, [and] partnerships with gig platforms to promote their insurance offerings. Mobile accessibility is critical. Gig workers frequently use mobile devices for work-related activities. So insurance companies need to ensure that marketing materials, websites, and online tools are mobile-friendly and easily accessible on smartphones and tablets, which we all know everybody has a smartphone or tablet with them these days. Another important change for the insurance companies is to have a seamless customer experience with self-service options. This is no different than what traditional market carriers or market insurance companies are looking for. Technology plays a crucial role in offering these options for gig workers to explore, purchase, and manage their insurance policies, offering that 24/7 customer support through online chats or virtual assistance needs. This helps insurers tailor their marketing strategies, develop customized insurance products, and improve the customer experience. We all know if it takes too much effort to get some general information or apply for coverage, people get frustrated and simply move on. 

Other areas include education and awareness to gig workers, predictive analytics, reaching out to those platforms for specific organizations that allow additional digital data as well as interaction with those gig workers, their needs, and requirements for them to work within these different organizations. So to sum it all up, Jen, the impact of the gig economy is changing every day across all industries. The change from a traditional insurance to new models requires a multifaceted approach that involves legislature changes, innovative insurance solutions, improved data collection, increased awareness, and collaboration among stakeholders, which in today’s world all require, you guessed it, technology. By adapting these models, we can strive to ensure that workers in the evolving world of work have adequate protection and support for them and their families. 

Jennifer Smith: Cheryle, thank you so much for explaining such a timely and important topic that I’m sure we’ll be hearing more about in the months to come. And thank you so much for spending time with us here today. Thanks, everyone, for listening. We’ve got more coming, so be sure to tune in next time on Sapiens Insurance 360.