The number of Americans participating in the gig economy is rising fast. Forty percent of the labor force in the United States is projected to consist of gig workers by 2020. That number is expected to grow by 50% before the next decade ends.
While new sources of income are good news to millions of American households, the world can’t seem to catch up quick enough with the rapidly evolving business landscape. The financial services industry, specifically the insurance sector, is guilty of this.
Many insurers are collaborating with companies offering more thorough and efficient employment and income verification solutions to serve non-traditional workers better. Insurtech startups are popping up to address the unique needs of freelancers and other independent contractors, many of which work online.
Yet, gig workers are somehow still considered as an underserved market. They buy can insurance products worth billions, but why is it many of them continue to feel like second-class members of the workforce? Below are the three main reasons.
Insurtech uses innovation to develop digital solutions to deliver novel insurance products catered to specific gig workers.
Trupo is an excellent case in point. This tech firm offers short-term disability insurance to contract employees in Georgia. It charges customers between $20 and $50 per month to help the insured receive as much as half of their monthly income for 12 months when they become too ill to work.
Stripe is also doing its share. The payment processing unicorn uses its platform to help freelancers get compensated more quickly and alleviate one of the biggest complaints about insurance companies.
While insurtechs are actively pushing the limits of modern technology to come up with smart ways to protect the financial needs of gig workers, many incumbents do not feel a sense of urgency. For instance, they argue that the current workers’ compensation system does not need a major facelift because the companies they serve already treat contract employees as regular members of the organization.
Not all gig workers are as lucky, though. Those who use platforms like Uber are not being considered as employees, so they can’t access the benefits regular employees typically get. Few insurance products are on the market to cover them financially.
Collaboration between established players in the insurance sector and tech startups is yet to become a norm. As long as incumbents are happy with the size of the slice of pie they have, they have less incentive to invest in strategic partnerships with creative, innovative, and resourceful insurtechs.
One of the reasons why many insurance companies are too slow to respond to the needs of gig workers is because much of the business sector has little financial obligation to independent contractors.
Although many states and major cities in the country have now adopted or considering to make amendments to existing employment laws, key regulations to solve the inequalities gig workers experience are not yet felt nationwide.
There is no stopping the gig economy in America from ballooning, but lack of tailored insurance solutions for independent employees can slow its growth. Only time could tell when insurers, in general, take gig workers more seriously and be treated equally as their traditional peers.