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Covering Yourself in the Gig Economy

Independent contractors often enjoy flexible hours and being their own boss, but they also have to meet employers' compliance requirements and obtain necessary insurance coverages on their own--sometimes at a hefty price.

Standard coverages such as general liability and professional liability top the list of insurance must-haves for most workers at on-demand companies such as ride-hailing services Uber and Lyft, cleaning services provider Handy and meal-delivery service Munchery, said Kevin Kiser, head of brand strategy and communications at Bunker, a San Francisco-based insurance technology startup that is focusing on the 1099 or gig economy.

"And with legacy requirements, workers' compensation and auto insurance are also often thrown into the mix, regardless if the worker has additional employees or is driving for the gig or not," Kiser said.

It's also not uncommon to see cyber, crime and umbrella requirements for nontraditional, or 1099, workers, Kiser said. "So that's at least seven different coverages with very high limits that are often required of independent contractor gig workers."

Between 20% and 30% of workers today, or about 162 million individuals in the United States and Europe, are engaged in some form of independent, nontraditional work, according to McKinsey & Company. By 20201, almost half of the private workforce will have spent time as independent workers at some point in their lives, according to MBO Partners, a provider of independent contractor engagement solutions.

The on-demand economy "represents a fast-growing sector of the economy," said Randy Nornes, executive vice president at Aon.

"Trucking was one of the oldest industries to move to the independent model," he said. "When people were owner-operators contracting out delivery there was no workers' comp for them. Insurers created a whole new product--occupational accident insurance--to meet those needs," Nornes said.

Some of the innovations are taking place in the auto insurance sector. "We saw that most recently with the 20 or so companies that have developed some sort of transportation network company policy, either as a standalone or an endorsement," said Bob Passmore, assistant vice president of personal lines policy for the Property Casualty Insurers Association of America.

"And we're on the way to getting legislation passed in 43 states that would require individuals to have the right insurance coverages for those jobs," he said.

But the auto insurance market isn't the only sector that is undergoing changes tied to the on-demand economy. "When people get involved in gig economy platforms they need to think about what their exposures are. Airbnb is a good example of that," Passmore said.

While coverages like workers' comp are in many ways easier to come by, "products such as professional liability become more challenging because of the cost and the limited availability of carriers willing to write those policies for part-time independent contractors," Nornes said. "The needed premium versus what the contractors can pay sometimes becomes difficult, and they often can't afford it."

But contractors can't afford to be without those coverages, especially because of the insurance requirements of many on-demand jobs, such as for-hire transportation, software development and package delivery, he said.

Other new variations on existing coverages are also likely, Campbell said. Usage-based insurance, for instance, allows independent contractors to turn coverages on and off, Kiser said.

In 2016, Bunker launched its first usage-based insurance product designed to protect self-employed workers against work-related injuries. The program allows insureds to tailor coverage to the length of their gig, he said.

"Studies show contingent workers average about 12 weeks at a particular project," Kiser said. "So they need a variety of products annually, all with fluctuating requirements.

There are also discussions about the creation of more portable benefits for independent contractors.

Amalgamated Life, for instance, has a host of voluntary offerings, such as dental, legal, whole life, term life, disability, accidental death and dismemberment, vision, critical illness and hearing.


"Policyholders can carry those coverages with them from job to job," said David Walsh, president and CEO of the White Plains, New York-based company. "As the market develops for those products, we'll put even more products on the line," he said, noting that voluntary benefits comprise a quarter of Amalgamated Life's premiums.

(This information is excerpted from a longer article, "A Changing Marketplace" by Lori Chordas, senior associate editor, Best's Review)