The gig economy1 is nothing new. Freelancers, consultants and independent workers have been around for decades. However, this particular market is growing exponentially year on year as advancing technology enables increased accessibility to fluid work projects and contracts. This supports the coinciding changing mindset of a previous generation, who wanted job security and a guaranteed income, to a new generation who want financial freedom and with a keen desire for flexibility. This trend is forecast to accelerate even further as the gig economy provides job opportunities in a COVID-19 world, where we are seeing a rise in formal job sector unemployment.
The gig economy encompasses a wide range of occupations and is defined by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. For many, gig work supplements their main income. For others, a range of gigs makes up their primary source of income. These individuals and the way they work do not fit neatly into a box, so traditional ways of approaching risk assessment need to be relooked. And insurers that ignore this market, do so at their own peril as more and more individuals enter this labour market.
According to Gallup, 36% of U.S. workers participate in the gig economy, either as a primary or secondary source of income. And South Africa is following this growing trend with the latest numbers from Statistics SA's employment outlook showing that temporary employment rose from 2.6 million in 2017 to 3.9 million in 2018.
Whilst this rapidly evolving employment landscape is exciting, it also poses challenges which the insurance industry, for one, needs to proactively anticipate, prepare for and adapt to, in order to fully seize the opportunities presented. Traditional risk assessment models are outdated as they do not sufficiently cater for these individuals who are often not working consistently, have no formal contracts in place or are unable to define what their anticipated income will be at any given point. This changes the way the industry needs to assess risk because these risks don’t change the fact that a gig worker has as much of a need to protect their income as everyone else.
Whilst these individuals enjoy flexibility, they don’t have a safety net because they don’t typically enjoy company benefits such as sick leave, further highlighting the importance and advantages of income benefits for this market.
Life insurers need to evolve in parallel and explore alternative ways of assessing risk, to overcome these challenges and to ensure we are able to continue providing quality income protection to individuals leading these new occupation statuses.
Income protection currently makes up only 6% of the life insurance market2. However, the number of customers with income protection is set to grow over the coming decade. More and more advisers are realising the importance and advantages of income benefits as opposed to lump sum only cover for their clients, because, quite simply, it better matches the need. Income disability benefits protect an individual, not only against permanent risk, but temporary injury and illnesses as well. We need to ensure that the gig market is not left behind.
To avoid the insurance gap getting larger, we have a collective responsibility to lead and provide answers in our area of expertise to support individuals going through this transformative moment. Whatever changes income protection sees over the years ahead, the biggest industry changes will come from insurers and advisers working together, to create the best solutions possible for all their clients.
1Gig economy – a labour market characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. (Oxford dictionary)
2Swiss-Re New Business Volume Survey 2018