The challenges the gig economy is presenting insurance

It’s no secret, the nature of working hours has changed dramatically over the past few years. 

And therefore, so have demands for insurance.  

To cater for this, more firms have started offering public liability insurance on a pay-as-you-go basis which means cover can be purchased as and when it is needed. 

It covers claims against businesses made by the public or clients who have suffered damages which could include their property. 

Offering insurance on this basis serves some markets like the gig economy who do not have the same access to insurance due the temporary short-term nature of their jobs. 

Enter Zego 

Several firms offer public liability insurance on a pay-as-you-go basis. 

Zego is one of them, overall it specialises in pay-as-you-go flexible commercial insurance. 

The firm’s premise is “if you’re not working full-time in a profession, then you shouldn’t need to pay for full-time cover.” 

It started out offering public liability cover for the gig economy within motor.

But expanded in July last year to offer this cover to the self-employed and freelance workers.

This was just before its former chief executive, Harry Franks stepped down and took on the role of chief commercial officer. 

The product serves an important part of the market by providing protection to those who are often excluded from annual insurance policies. 

Its current chief executive and co-founder, Sten Saar has been with Zego since the beginning, previously as its chief operating officer.  

Prior to this he was the operations director for Deliveroo, as was Frank but as the firm’s global head of procurement.  

Saar said: “I saw first-hand, particularly while working at Deliveroo how insurance was a major factor preventing people from getting into work and when they did, potentially forcing them to work full time just to cover the cost of an annual policy.

”Traditional insurers have failed to provide public liability products fit for modern, flexible ways of working, and we thought it was wrong that many people were unable to find appropriate cover if they wanted to do a couple of hours work on the side - leaving them open to the risk of claims against them or completely deterring them from work.

”This is about providing the protection people need, exactly and only when they need it.” 

He added that public liability insurance is “essential” for many working in the gig economy including cleaners, babysitters and carers as it provides “crucial protection” against the cost of claims for injury or damage to property. 

Zego found that many people were put off insurance because traditionally it has only been available to those on full-time work on an annual basis. 

The firm recently secured a venture capital deal to boost its expansion.  

Digital Risks also offer public liability insurance on a pay-as-you-go or tailored basis. 

Risky business 

While acknowledging the demand for this type of insurance at short notice or arranged out-of-hours, Peter Blanc, chief executive at Aston Lark pointed out the dangers it posed.  

The problem he said is that cover is purchased on an ad-hoc basis, and the indemnity level left up to “individual choice.”

He explained: “What we have seen in the personal lines arena is that given the choice, people will select less rather than more cover because it’s cheaper, for example with household insurance sold online many customers would buy insurance without including accidental damage when it is the most common claim. 

“If they need cover for more than a handful of days a year then it won’t be cheaper anyway and arguably the risks of them going without insurance are enormous.” 

He gave the example of an uninsured contractor worker accidentally burning the customers property down after rewiring their house. 

“Obviously the insurance industry is then left looking not so great, as the product hasn’t worked when the policyholder needed it most”, Blanc said. 

Bring back the broker 

And given the choice Blanc reiterated, most people would choose the limit of indemnity that is cheapest, which might not cover them adequately. 

This could potentially result in more claims getting rejected due to appropriate cover not being enforced in the first place. 

He stressed that we should be encouraging businesses to take advice as brokers are “incredibly good value.”

This is because people never think an insurance claim is going to happen to them, “which is exactly why they need an insurance broker advising them. 

“People think insurance is an unnecessary overhead until of course they have a horrible loss and suddenly their attitude changes,” he added.  

Niche 

Nonetheless, public liability insurance offered on a pay-as-you-go basis fills an important gap in the market, namely serving the gig economy that would otherwise be excluded from traditional models. 

But the value of the broker is evident.