beiWith population growth, technological advancements, and financial struggles arising, the gig economy is the new thing.
What is the gig economy?
According to this source, the gig economy is a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.
Many have found comfort in the age of smartphones that have led to ride-sharing, home-sharing, and online staffing. And it’s not just the Millennial generation. More seniors are embracing this shift with on the demand gigs from platforms such as Uber, Airbnb, and TaskRabbit. So, while this new market is bursting with untapped economic potential, there are also unknown risks. These risks are forcing insurance to change its game.
As an insurance agent, you are going to witness this evolution and be the first person people turn to for guidance. This is your opportunity to establish trust and expertise in such a niche market. Getting ready to face your clients, here are some common questions that you should be equipped to answer.
Does working within the gig economy jobs make someone an employee?
Currently, people working for hire such as independent contractors are not ’employees’ of the platform they’re working under. Instead, they are ‘gig employees’ representing the temporary position. This is especially true when using apps such as Uber, Postmates, or TaskRabbit. These gig employees are not privy to sick pay, workers comp, or unemployment insurance. Additionally, they must pay maintenance and gas on their vehicles. Gig workers exempt from regular benefits find themselves struggling to make a living.
However, a new California Bill (AB5) has been proposed to require companies to have new guidelines when distinguishing between an independent contractor and employee (with some exemptions such as insurance agents, doctors, and real estate agents). Meaning companies that host ride-sharing and on-demand services may be obligated to make gig employees regular employees.
Who carries the risk in the gig economy?
It’s important to keep in mind that each ride-sharing app may have different forms of coverage due to the quickly growing and slowly regulated market. Additionally, while the company may be financially responsible for select situations, they are able to avoid employer liability for accidents that employees are responsible for. This is because they classify their workers as independent contractors. Here are some examples of the main players within their own markets that you should be aware of.
A major ridesharing platform, Uber, sets the tone for the rest of the ride-sharing market when it comes to how they regulate people who chose to contract work through their platform. Uber has three main forms of insurance they offer to their drivers: third-party liability insurance, uninsured/under-insured motorist bodily injury insurance, and contingent collision and comprehensive insurance. These policies are limited to certain times during an Uber shift and may not provide full coverage in all situations. If circumstances do not meet these policy guidelines, the risk falls on the driver.
As one of the largest home or space sharing platforms, Airbnb is rapidly growing due to its convenience. However, hosts are facing the probability of theft, damage, and injury taking place within their home while renting. Due to the risk associated with hosting strangers in your house, Airbnb offers Host Protection Insurance. This covers up to $1 million per occurrence in the case of bodily injury or property damage. While this may take away some ease for hosts, it, of course, comes with exclusions such as damage due to things like mold, injury, and loss of earnings. Hosts should be aware that beyond certain guidelines, the risk is theirs to take.
This on-demand service app allows users to regularly and efficiently hire workers to help with a wide range of tasks from moving, picking up groceries, and organizing closets. However, it carries risks. If someone gets in an accident, steels, or breaks an item while on duty, TaskRabbit has no insurance policy. Instead, they offer a ‘Happiness Pledge’ that allows them to decide if clients and users will be given compensation for theft, injury, or damage done by workers.
Due to the complexity and variety of platforms out there offering on-demand or sharing services, it is important each gig worker be aware of their insurance coverage, and what they are still held responsible for.
What extra coverage is beneficial if working in the gig economy?
It is important for gig employees to cover themselves in case of incidents. If your client is taking part in ride-sharing, they should be aware of how their personal insurance interacts. These situations vary on how carriers handle insurance. This is due to the fact that personal policies don’t cover clients being paid for rides. Your clients may want ride-sharing insurance policies in order to potentially close some of the coverage gaps, but they are currently only located in select areas. In the realm of space sharing, insurance policies depend heavily on different carriers. If your client is using Airbnb to rent out his or her space, learning how their carrier’s homeowner insurance, renter insurance, business insurance, or even landlord insurance plays a part when the situations change will set you apart. As we see this sharing-economy grow, we will be sure to see insurance follow.
At which point does someone or something transition away from personal use?
Insurance works differently through different stages of work. With how quickly we seem to go about our day, our insurance policies may be moving just as quickly. A common assumption is once someone is making money for a service, it may no longer be covered under the policy. For example, drivers of the Uber app have different phases of insurance coverage.
First Phase: Uber app is off – personal insurance is your only coverage.
Second Phase: App is open and the driver is waiting for ride request – third-party liability through Uber can now be applied.
Third Phase: Driver is in route to pick up a rider and during the entire trip until rider leaves – all three forms of Uber insurance apply.
Insurance is no longer limited to traditional P&C or healthcare markets. It is evolving in our economy due to temporary housing, vehicles, staffing, odd jobs, and even peer to peer financing. As an agent, you should have a grasp on this new industry and be aware of the changes to come. Your clients may be joining this fast-growing economy. So, it’s best if you start building your credibility within this industry now.