The global corporate landscape is changing and small to medium-sized insurance companies have excellent opportunities to capitalize on these changes. The buzzword fueling the change is known as the “Gig Economy” and it is taking the small business world by storm.
The Gig Economy consists of an ever-growing demographic of individuals who work as independent contractors or freelancers in various capacities. Examples include drivers for Lyft and Uber, and house-sharing services such as Airbnb.
While the concept of working as an independent contractor or freelancer is not new, the emergence of the digital age has broadened this niche with increasing frequency among Millennials and retired Baby Boomers alike. This has been a concern for insurance companies and state regulators. Questions regarding worker safety and liability risk have spurred some insurance companies to develop unique coverage plans for the Gig Economy.
One of the changes emerging on the insurance landscape is the shift from traditional insurance agents and brokers to a digital platform for sales and service. This is enabling smaller insurance companies to acquire and retain customers more efficiently.
The Gig Economy is also creating opportunities for commercial insurance carriers. As individuals leave large employers to work as individual contractors, they often use the portability of employer plans to take the coverage with them. However, doing so often causes these individuals to bear a greater cost of the coverage or pare down the coverage for cost savings. As this phenomenon continues, a natural pooling effect is occurring in which insurance companies can identify affinity groups with multiple opportunities included for new types of coverages and methods for administration.
Smaller insurance companies interested in capitalizing on the opportunities within the new Gig Economy need to begin now to prepare their insurance policy software systems to handle large categorizations of risk along with the individual data that pertains to each pool of risk. They may wish to partner with insurance software companies that are already knowledgeable in developing and managing plans for the Gig Economy.
Some insurance software companies have developed apps that can be downloaded and used by the contractor as needed. For example, a driver for Uber or Lyft can log in to the app when a route begins and then log off when finished driving. This helps to better streamline coverage for when the driver is actually working. This is commonly included in an insurance policy software package provided by the company for the insured.
As Baby Boomers retire, many are opting for the flexibility of freelancing to supplement their income while Millennials are opting for the opportunities that independent contracting can provide. As these trends develop, it is important that insurance companies look for ways to grow accordingly.