How is the Gig Economy Shaping Insurance?
With population growth, technological advancements, and financial struggles arising, 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 and more seniors are embracing this shift by earning money on the side 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 associated – risks that force 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. Whether you are in the sharing-economy insurance market or not, this is your opportunity to establish trust and your expertise as an agent even when it pertains to such a niche market. Getting ready to face your clients, here are some common questions that you should be equipped to answer.
Does working for on-demand jobs make someone an employee?
Currently, people working for hire such as independent contractors are not considered employees of the platform through which they find jobs. Instead, they are referred to as gig employees to represent the temporary position, especially when in fields using an app or online platforms such as Uber, Postmates, or TaskRabbit. These gig employees are not entitled to sick pay, workers comp, or unemployment insurance and are required to pay maintenance and gas on their vehicles. Although beneficial for the companies, to be exempt from paying certain benefits they would to a regular full-time employee, independent contractors find themselves struggling to make a living while baring large costs and reaping only a portion of the profits.
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 ridesharing and on-demand services may be obligated to make gig employees regular employees.
Who carries the risk in a sharing-economy?
It’s important to keep in mind that each ridesharing app may have different forms of coverage due to the quickly growing and slowly regulated market. And while the company may be financially responsible for select situations, they are able to avoid employer liability for employee caused accidents since 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 ridesharing 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/underinsured 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 faced with 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 that covers up to $1 million per occurrence in the case of bodily injury or property damage as protection against third-party claims. While this may take away some ease for hosts, it, of course, comes with exclusions such as damage due to things like mold, injury from something done intentionally, 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. A lot can be completed with this app, however, not without its 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 on their own discretion if clients and user 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 what insurance is initially offered, and what they are still held responsible for.
What extra coverage is beneficial?
It is important for gig employees to cover themselves in case of incidents. If your client is taking part in ridesharing, they should be aware of how their personal insurance interacts. These situations vary on how carriers handle the insurance due to the fact that personal policies almost always don’t cover clients being paid for rides. Your clients may want ridesharing 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 is applied 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 to make is that once someone is making money for a service, it may no longer be covered under the person’s policy. For example, drivers of the Uber app have different phases of insurance coverage.
Phase 1: Uber app is off – personal insurance is your only coverage
Phase 2: App is open and the driver is waiting for ride request – third-party liability through Uber can now be applied
Phase 3: 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 a traditional P&C or healthcare markets; it is now filled with evolutions in our economy due to temporary housing, vehicles, staffing, odd jobs, and even peer to peer financing. As an agent, it is beneficial for you to have a grasp on this new industry and be aware of the changes to come. Your clients may be getting involved in this fast-growing economy and it’s best if you start building your credibility within this industry now.