COVER explores the options available to the self-employed and freelancers
According to the ‘Restless Worklife: Protecting the gig worker' report from Zurich in 2017, one in six out of the total UK workforce is now a gig worker with 58% being self-employed. However this ever increasing workforce finds itself seriously under protected.
Aside from the need to chase invoice payments and the worry of where the next project will come from, the freelancer also has the added fear that if they were to suddenly become sick, they will be unable to take time off, without the security that a person employed by a big company might have. But now it appears that the insurance market is responding with new and repackaged products to help close that gap.
One of the most recent changes has been the creation of two new propositions that aim to make insurance more accessible for those going it alone: Create, launched earlier this year, and Collective Benefits, which announced it reached £3.3m seed funding yesterday.
"We would encourage insurers to come and talk to the adviser community about these products and how they can solve these issues"
Collective Benefits, underwritten by Aspen, was borne out of personal experience of its founder and CEO Anthony Beilin, previously head of innovation at Aviva. He found himself out of work for five months in 2018 due to a serious back injury.
"A friend of mine who was a big company employee [but had gone self-employed] and I can't quite remember what he said anymore mainly because I was on about 50 grams of Tramadol every hour," explains Beilin. "But he said something along the lines of: ‘If I had your injury I'd lose the house. I don't have sick pay. Maybe I could survive a month. I had health insurance but it was a corporate plan and it would have cost £110 to take it over myself and I couldn't afford it.' The reason he came to see me that day was because his son was ill and he didn't have any corporate childcare schemes so he had to take a day off and so was already losing money that day. There was a light bulb moment."
Collective Benefits offer a range of products through gig economy platforms. "[These platforms] are facilitating this on behalf of their self-employed workforce to drive retention, loyalty and engagement, whilst simultaneously supporting and protecting their workforce," Beilin tells COVER.
Two of its products are variations of those already available - its Time Off Work bundle, similar to income protection, it also offers family and compassionate leave, and its Calamity bundle, which is their version of critical illness cover (CI). "20% of the population can't afford to have a week off ill," Beilin says. "That's a disaster waiting to happen. Insurance is a beautiful product that has the ability to drive change in ways other products don't, what it hasn't done is to fit the needs of this new demographic."
This new demographic brings an extra challenge for insurers in the form of their uncertain income. "We've been insuring self-employed people for years and years," Peter Hamilton, head of retail protection at Zurich, tells us.
"The gig economy worker is a particular flavour of that and people have [always] had some degree of uncertainty in the level of income that they're actually going to get from week-to-week or month-to-month so on one level this is no different."
He explains that with life cover and critical illness cover there are no really obvious barriers to a self-employed person obtaining them, apart from the need to budget for the monthly premium. When it comes to income protection, that's where insuring can get a little precarious. "There are some features that we, and others, are starting to bring in - such as minimum payment guarantees," Hamilton continues.
Hamilton says that Zurich would pay out £1200 a month as a minimum payment guarantee. "If I'm freelance I might think I'm going to earn so much a month roughly and so I'd set myself a level of cover that's commensurate with that. Historically plans have been relatively inflexible, probably because the technology made it hard to do that, but increasingly plans are being created that can change as your circumstances change."
Cavendish Ware's Roy McLoughlin points out that as society is changing at such a rate the need to adjust is important. "As advisers work out that our clients of tomorrow are going to be different to our clients of yesterday," says McLoughlin. "The adaptability to fit in with the ever changing work pattern is key isn't it?"
McLoughlin points out that making sure that someone who has two or more income sources is covered as these sources move up and down they are still appropriately covered. "We're very wary of generation rent in particular," he continues. "More and more people are renting rather than owning and [we need to] make advisers aware that generation rent is a significant area for business advice." And with the likelihood that the self-employed population will be renters being high, that brings greater risk if they do not have the correct cover in place.
"We would encourage insurers to come and talk to the adviser community about these products and how they can solve those issues," says Mcloughlin.
While products features fit to protect freelancers and the self-employed do exist, the main challenge lies in getting them to take out cover in the first place. Without employers providing them benefits, younger workers especially are less likely to be liaising with a financial adviser and social awareness around the need for income protection is still very low - even with statutory sick pay offering as little as £94.25 per week. Hence, partnerships with existing gig economy platforms like Uber and Deliveroo can provide potential distribution channels that can offer pick ‘n' mix-style solutions to an untapped market.
As Chris Samuel, account director at iPipeline, told COVER at the end of last year, this approach may be the future. "In 2018, Uber partnered with AXA to launch its Partner Protection benefits package, which provides its drivers with a range of benefits including medical cover and sick pay. Deliveroo has also partnered with specialist bike insurer Bikmo to offer its cycle couriers free insurance to protect them and their earnings if they are involved in an accident," he said.
Create, which offers a suite of general insurance products to freelancers, underwritten by Hiscox, alongside life and income protection products from Vitality, launched in conjunction with broker firm BHIB in January. Built by in-house software company Brokertech, it allows freelancers to select levels of cover on an ongoing basis or to fit temporary projects depending on what work they have on.
Meanwhile, companies like motor insurance disruptor Zego are using artificial intelligence algorithms that circumvent the traditional underwriting processes to price risk through flexible monthly or pay-as-you-go subscription models.
The industry's drive towards ‘prevention is better than cure' is prevalent even in the some of the newer propositions emerging. Broadly speaking, protection products have rehabilitation benefits and access to counselling services and Collective Benefits also has a non-insurance element to its cover that offers mental health support, private healthcare and a 24/7 digital GP.
According to Beilin, the removal of all underwriting questions and "innovative" pricing, alongside attempts to speed up the claim journey will likely appeal to customers.
Zurich's Hamilton adds that quick and easy access to insurance that is as adaptable and flexible as modern working patterns is likely to help grow the protection market. "I think overall the products that are available on the market today meet the needs of the gig economy work," Peter Hamilton continues. "Whether going forward we'll see greater use of technology in an app kind of way where you switch on and off at will, I don't see that coming immediately but you can imagine the technology will lead us there at some level."
iPipeline's Paul Yates agrees that technology will play an important part in navigating this rapidly expanding landscape citing that solutions such as self-serve and adviser managed change, which would include chatbots and virtual assistants. "This is where the delivery of subscription type models could potentially help - the Netflix model for protection," Yates explains.
Yates also believes that AI will have an integral role in the future of protection for freelancers, using it to create algorithms that will have the ability to map expected change cycles, flex on price and underwrite accordingly.
In life, the unexpected is always around the corner. As a self-employed person, freelancer or gig economy worker this uncertainty is increased. Getting the right amount and type of cover is vital regardless of profession or nature of career. "You are going to face moments in life that don't go to plan - sickness or having a baby are part of every day life," Beilin concludes. "People say ‘I looked it wasn't suitable. It's too expensive' so the market has got to redesign those products. The industry has been quite bad at communicating to different people's needs." In his view, what is required is the reinvention of the whole end-to-end experience.