The gig economy, a product of our ongoing digital disruption era, is one of the biggest trends to affect the workforce in the last decade as it really took off in the recession period between 2008 and 2009.
It refers to temporary short-term jobs, and the freelancers and independent contractors who are performing those jobs, which are transforming the traditional economy and the way companies hire, train, reward and manage employees. However, it must not be seen only as an opportunity for employment purposes but also as a new growing market.
Getting a real measure of this global phenomenon is not easy, especially when some may underestimate its true size by only considering gig work as a primary source of income. In the US, more than 35% of the workforce seems to be participating in the gig economy, and that number is expected to jump to 43% by 2020. Also in Europe, the size of the gig economy as a secondary source of income is growing, especially in Austria and Italy. In some countries like China, India, Indonesia and Brazil the share could be even higher considering that gig work for many is also a primary source of income.
These new freelancers have several motivations: they are looking for more flexible alternatives to traditional ‘9 to 5’ jobs, they are supplementing their primary income, they are pursuing their areas of interest, and in some cases, they are looking for a transition to retirement…mIn fact, it is a false myth that only millennials love to gig!
Technology and the gig economy
Technology, for sure, has played an important role in this new business and employment model. The current cutting-edge digital online platforms, along with the proliferation of mobile applications, have paved the way for the gig economy by enabling an instantaneous matching of supply and demand, bringing together service providers with people needing those services.
Fundamentally, there are two main kinds of gig, digital platforms: the labour-based ones, which enable workers to provide activities, completing tasks like driving a car (e.g. Uber), delivering parcels and food (e.g. Deliveroo), assembling flat-pack furniture (e.g. TaskRabbit) and the asset-based ones, which allow people to rent or sell their unused assets (e.g. Airbnb, eBay).
These platforms have evolved and have enabled over time the transformation of the gig economy from a C2C market, with individuals offering/demanding products from each other like on eBay founded back in 1995, into a B2C market with new models exploiting underused assets or skills. Now the gig economy is also a B2B market, highlighting transactions between different sectors and the need for new insurance products.
The gig economy insurance gap
Because the gig economy is a new, flexible, and short-term model of work, it does not provide the benefits and the protections that come with traditional full-time employment, such as life and health insurance, unemployment insurance, paid vacation or days off and minimum wage protection. Gig workers (and consumers), as they are not covered by their employers’ insurance, may be exposed to greater risks than traditional employees. Furthermore, they may not even be fully aware of all the risks they are exposed to, as gig work does not fall neatly into commercial or personal insurance. In fact, personal insurance will not cover accidents that arise, for example, from transporting passengers with your car if for commercial use; and the coverage, which some ride-sharing platforms do provide, is not robust enough and might still expose employees to liability.
Therefore, the gig economy has created a significant insurance and protection gap for these kinds of workers.
And that’s why this represents a great opportunity for the insurance industry: there is a new lucrative opportunity to provide tailored insurance policies for gig workers, as this new model of work demands new ways of thinking about insurance, with products that are flexible and able to be customised to particular needs.
Is there space for traditional insurers in the gig economy?
Traditional carriers keep on facing challenges like policy pricing depending upon years of historical loss information and legacy systems and organisations that are not easy to adapt.
On the other side, gig workers need speed, frictionless transactions and are looking for new, very flexible, short-term coverage; they may not be willing to pay annual insurance premiums for the time they are not working.
InsurTech entrants with their easy, digital, on-demand policies, have currently better tapped this segment of the market. They have leveraged their state-of-the-art platform based on artificial intelligence algorithms that bypass the traditional underwriting processes and the outdated legacy systems in order to price the risk through flexible pay-as-you-go or monthly subscription models, based on the behaviours and needs of the workers.
However, large insurers, wishing to expand in this space, could also quickly adapt or collaborate with new start-ups in order to seize this new market opportunity, as the insurance gap is wide, considering the vast number of individuals operating within the gig economy.
By now, there are so many successful joint ventures and partnerships running between incumbent insurers and InsurTechs in the sector and, also in the sharing and gig economy, they can represent the easiest and fastest way for traditional carriers to embrace these micro, scalable, on-demand products.
The bottom line
Although we don’t know exactly what the workforce of the future will look like – and there are concerns, particularly regarding the legal status of gig workers in jurisdictions around the world, and the possibility that gig workers could be subject to labor regulations – all signs indicate that the gig economy will continue to grow and that insurance will keep transforming.
The next giant leap should be when health insurance, retirement plans and benefits like stock options and grants become ‘portable’ and non-exclusive to traditional employment, opening the doors to the gig market. This might be, in some cases, already beginning to happen among major players like Airbnb and Uber and some larger insurers moving forward by trying to attract a broader section of society including non-salaried segments with simple, monthly and flexible insurance plans.
 The Gig Economy Opens The Door For Employment Opportunities, Forbes
 Austrian study shows that gig economy is on the rise throughout Europe, Uni Global Union
 The New Freelancers: Tapping Talent in the Gig Economy, BCG
 How the gig economy is becoming the new retirement plan, Wealth Professional
 Unleashing the promise of flexible working, Adecco Group
For more insights and developments in insurance and InsurTech, please visit KPMG.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2019 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.