Insuring the gig economy:
A blue ocean opportunity
Published: 3 February 2023
By Gian Hayer
Digital Content Producer
Over the past decade, the gig economy has grown immensely, with experts predicting that it will be worth $455 billion globally by the end of the year, representing more than 17% growth year on year. While this offers a tremendous opportunity for insurers, the unique and flexible nature of the gig economy presents challenges, demanding new ways of thinking to offer tailored policies.
To unpack the opportunities and challenges in insuring the gig economy, I sat down with Garrett Olson, Global Head of Insurance at Wolt, a Finnish delivery platform that has partnered with Collective Benefits to offer a tailored insurance proposition to their riders. We look forward to hearing more from Garrett at Insurance Innovators: Nordics in Copenhagen, 21-22 March.
What challenges might insurers face when working in the gig economy space, and how can they be overcome?
First of all, the sheer amount of data the gig economy enables paralysis by analysis. We see the best results when the 80/20 rule is applied to making decisions based on data. Perfection isn’t the target state, end user satisfaction is. Working with minimal data points and building from it breeds efficiency.
Secondly, the gig economy requires pay-as-you-go risk calculation and premium collection. Gig workers drop in and out of work, so a PAYG model allows for relevant coverage for their risk, better adoption, and affordable premiums.
Finally, existing lines of business are too static and do not represent the blurred lines of risk in the gig economy. The courier partners desire PAYG insurance for what they perceive as a single risk to their livelihood. They are not interested in the complexity of each product, nor want to be forced to buy numerous policies. Depending on the country, gig workers may require up to five insurance coverages: motor, third party liability, professional liability, personal accident and property. A single policy for all these risks would have a far higher adoption, and this is what we should aim to offer.
How is Collective Benefits’ insurance proposition particularly suitable for Wolt’s courier partners?
Collective Benefits is a tech company that provides pay-as-you-go insurance, tailor-made for flexible workers. Their only focus is on independent contractors, and it shows in their community engagement and ability to build bespoke coverages and wellbeing support. We like how Collective is continually innovating and is laser focused on the welfare of gig workers. What’s special about our partnership with Collective Benefits is that we’ve built our bespoke insurance proposition from scratch; it doesn’t exist anywhere else. Collective makes use of our data, allowing us to provide coverage that is uniquely suitable to the needs of Wolt’s self-employed courier partners.
At Wolt, what are you looking for in a potential insurance partner? How can insurers make their propositions competitive in the gig economy?
Any insurance partner for Wolt needs to be comfortable with rapid innovation. Though it may sound cliché, a partner needs to have the appetite to “fail fast” while testing propositions and claims processes. The most successful insurtechs that we work with go deep into a specific exposure, hypothesis or future state. We work with all types of insurers, but we see that incumbent insurers tend to be more risk adverse, slow and complex; their priority is turning a profit and avoiding adverse selection. A potential partner needs to be excited about data, willing to build something new from the ground up and humble to learn from missteps taken after going to market.
Each partner we work with has a unique vision of the future that is aligned to our goals, which is why Collective Benefits is such a great fit.
Though it may sound cliché, a partner needs to have the appetite to “fail fast” while testing propositions and claims processes.
How do you see insurance in the gig economy space evolving over the next five years?
The knowledge and, or desire to acquire savings and protections by gig workers are being exploited by groups and regulatory bodies against the flexible working model.
The knowledge and, or desire to acquire savings and protections by gig workers are being exploited by groups and regulatory bodies against the flexible working model. There is a belief that self-employed courier partners can only have access to long-term savings products through the status quo of employment models. Companies such as Wolt are aware of this, and are considering ways to solve this. While these conversations are at an early stage, we see innovation taking place across the insurance sector that would collectively allow companies like Wolt to meet the desires of not only the regulators, but also the independent contractors for longer-term savings and protections.
In addition, I envision direct-to-customer insurance policies being far more affordable and accessible for the gig economy. To offer D2C policies for the gig economy, insurers would have to offer pay-as-you-go propositions, and we believe that the existing propositions will continue to innovate over the coming years.