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How the millions of Gig workers impact the insurance industry

Presented by your online pay stub creator  07-25-2019


   By John Wolf 


The traditional work was in a factory or office from the morning to the afternoon for 40 years. Employees took their retirement gold watch and monthly pension pay. Now is the era of the technology,  The way we work today is entirely deferent, we can work for the same organization and be in the other part of the world or work as a taxi driver that uses a smartphone application to communicate with its passengers and charge the fee for the service. This gig driver can work the schedule he wants to accomplish.

Today’s technology facilitates us to work online with no importance where we are in the world. Any professional that uses a PC to do his or her job can be tethered to the organization that needs the services that this professional can provide. Computer, smartphone, and Internet technologies enabled this trend that is called now “Gig economy.”

The  NPR poll from  January 2018 shows us that there are 32 million independent contractors and freelance workers in the U.S. gig economy. In other words, one of every five working people is taking part in the gig economy. Between those workers are computer programmers, accountants, and writers making a living through agencies like UpWork, Freelancer. Uber and Lyft drivers are picking up passengers through apps, and odd-job performers on FiverrTaskRabbit.

It is expected by Edelman Intelligence study that By the year 2027, half of the U.S. workforce will work as independent contractors or freelancers. It will have a considerable impact on the benefits and insurance industry.

The insurance giant Lloyd’s predicts in this most interesting article  Sharing risks, sharing rewards that by the year 2025 global sharing economy could be as big as 335 billion dollars.

A gig cook

Here is the bottom line of Lloyd’s article:

The sharing economy has already brought significant changes to the way people live their lives from traveling to eating and working. However, there is still tremendous untapped opportunity, to grow the number of people using services and sharing assets and insurance has the potential to help unlock future growth.

These significant shifts in the way people work and produce income are challenging the social benefits business world that have to find how to adapt to these changes.

How the Gig Economy Impacts Benefits and insurance Industry?

One hundred twenty years ago, Germany was the first nation to enact a law that protected the old-age workers’ with a social insurance program that paid the pension to the retirees.

These days we have obligatory and more complete protection for the workers that work for an employer traditionally and get their Legal Benefits.

In the U.S., the benefits are acquired by being a regular employee. The employer provides health insurance coverage that its cost is shared by both employer and employee together — the same with the pension plan.

The employee paycheck is the net pay after that the withholdings for the different benefits. The retention or deductions will be seen on the pay stub delivered to the employee with the “year to date” balance to show how much was paid through the year.

A programmer

As employers, purchase insurance for many employees and are considered a long term consumer bu the insurance companies. The health insurance through the employer will be much cheaper than privet health insurance.

The workforce that is shifted to the gig economy is losing the right to enjoy the traditional benefits system and stay with no benefits unless buying by themselves and paying more for the health insurance as a lonely buyer buying directly from the insurance companies.

Gig workers stay vulnerable, without the low-cost coverage; they will have no way to pay the medical cost and no sick days payment. There will be no safety net to protect them for illness injuries and bankruptcy as a result of paying medical assistance or not producing income for some time.

As the gig worker is not paying Social Security tax, there are no unemployment benefits. The lake off employer means that there is no severance pay. Pension is one more issue to resolve, you can read about resolving the pension issue  Are you a gig, saving for the old-age retirement?

Gig workers can not get the government-run social assistance such as unemployment pay and pensions, and they could lose the gig job suddenly with no rights for a  severance payment.

“The protections that labor unions in the late 1800s and government-sponsored “social safety net” programs in the 1950s (UK National Health Service, 1948; U.S. Medicare, 1956) sought to stitch together, the sharing economy unravels.” — AIG

Gig Workers

The U.S. Bureau of Labor Stats, counting the employees that are reported by their employers, found in 2015 that only three percent of full-time employees had a non-fatal illness or injury.

An AIG survey that was made on the total of cases treated by insurance companies discovered that six percent of gig economy workers had a non-fatal illness or injury. The comparison of both statistic sources shows us that a gig worker has double the chance to get a disease or injury that can prevent them from working temporarily or for a lifetime.

Take a moment to watch Benefits in the Gig Economy: The Evolution of Employment

Gig worker has an absolute need for health and disability insurance coverage.

How Can Gig Workers Find Protection?

 Gig economy entails calling for more significant benefits portability and voluntary benefits.   

Companies such as SurveyMonkey understood that by resolving the benefits issue, they could attract better trained and talented people for their organization and create a happier working atmosphere.

This effort can produce a backfire if the court will consider that the company is contracting misclassified employees. To avoid having problems with the law, you better read about Misclassification of employees as independent contractors and avoid having legal problems.

Independent contractor working in construction

Having a case of misclassifying workers will open a “Pandora’s box” for employers.

Note: “Taking a legal point of view, it’s not that easy to turn the workforce into contractors.”

Employers could get themselves into accusations of tax liabilities, wrongful termination suits, and violation of other workers’ rights.

Below are the warnings about what to avoid having troubles with the tax authorities or the workers. Make sure to avoid having this kind of problems.

    • You should not define the work hours for your supposedly independent contractor.
    • By providing equipment or supplies to your claimed contractor, you can lose a case about misclassifying of a worker.
    • If the relationship is indefinite, and the worker works in your workplace every day for a long time. It must be a temporary job.
    • You don’t receive an invoice from the worker. The contractor should be treated as a vendor under accounts payable. Paid upon the invoice and not pay stub.
    • Independent contractors typically work with multiple clients. If the worker only works for you, it may become a misclassifying case.
    • If there isn’t a contract, to protect your business from the worker’s lawyers, you should not start working before you have a signed agreement.
    • The worker job should not be part of your core business services or production. Contractors should provide services that shouldn’t be an integral part of your company.
A writer

 Self-protection.

 The most straightforward way for gig workers to protect themselves is to buy their protection for health, disability, and life insurance and make independent contributions to their retirement funds.

The security will cost them more then it cost to the regular employees, and the retirement will be less attractive in its conditions than these that the regular employees enjoy. The gig workers will have to manage the finances taking care of this payments and contributions on a monthly bases, no matter if they have the funds or not.

“The most prominent InsurTech trend of 2019 will be the industry taking steps to catch up to the burgeoning gig economy. Existing insurance models don’t work well for independent contractors, which are projected to make up over half of the workforce within the coming decade.” — Chad Nitschke, Co-founder, Bunker

Programmer

Help Can Come From the Benefits Providers Or Advisors

Business is based on demand and offer. The gig economy created a request for the benefits and insurance they need. This demand made the benefits and insurance industry respond to the gig economy needs. If the benefits providers customer base has shrunken (moved to be gig workers). Their natural reaction will be looking for new products to offer to the market, made of gig workers.

Prudential survey, shows us that the lack of benefits is the most cited disadvantage for gig workers. The 70 percent of the people under the age of 35 that work as independent contractors or gig workers have no access to social protection.

AIG’s survey tells us that most gig economy workers are willing to purchasing health and life and disability insurance to protect themselves.

Benefits and insurance providers have the challenge to adapt their efforts to the gig economy. Working with organizations of gig workers like Freelancers Union, local chambers of commerce and the coworking spaces like WeWork, will be a lot better, comfortable and practical on the cost of a package of social protection,

Like in any other business, grouping and making larger orders will improve the condition and the costs of a policy. The larger the group is, the better the coverage will be. Larger insured groups will get better terms for the older members with pre-existing medical conditions, or higher-risk occupations, and better rates.

The companies and organizations that can provide benefits or social protection to the gig economy workers need to customize insurance packages that are suitable to the industry. Old workers will need more coverage for precondition health and better saving plans for their pension. The younger gig workers members of the same group will need to be considered according to their age and financial obligations, starting with their student loans payments.

A gig worker may need some more coverage than health disability and retirement, as a one-person business, it may need liability for the programing or coverage for car and driver at the activity as independent application taxing, or any other risk taken while working. This professional need for insurance makes the gig economy even more attractive to the insurance industry and may help the gig workers to get even better coverage for the benefits they need.

 

Self employee barber

Either society tolerates the trade-offs of a more flexible workforce—where it is sometimes unclear who pays the medical bills when a freelancer is injured, and where there is no such thing as “paid time off” for disability or bereavement—or a new social contract is constructed.” — AIG

Consultation has an Important Role in Educating the gig workers

Some gig workers will worry about having insurance, but the younger once will not think about the far future or being sick or injured, they may work hard and make great money, but they do not worry about appropriate insurance to cover their gig activities. The reality is just the opposite, as the AIG survey shows that the gig workers are two folds likely to experience an injury or illness. Good coverage for disability is necessary for the gig workers to avoid losing it all if they got sick or injured.

“While disability coverage isn’t part of most traditional benefits packages, it’s a must for anyone in the gig economy. Nothing is more valuable than protecting yourself and your family financially when you’re recuperating from an illness or injury.” — Brian Greenberg, Founder, True Blue Life Insurance, Inc.

It is essential to educate the gig community about the importance of insurance to preserve their lifestyle and protect their families in the case they are in disability status or lost their life.

Brokers and advisors from the insurance industry can educate the gig workers, offering them their expertise on the whole aspects of insurance and their relationship with their customers and third parties.

Young and inexperienced gig workers may not be aware of some risk they bear while working as an independent contractor. A creator of software or graphic ads designer can have a mistake or a bug that may have some liabilities that will need insurance coverage to pay damages that the gig worker can cause.

Note: Advisors can use their expertise and help to find the right policy for these risks. Having someone to help with expertise advising would help the gig workers to navigate these insurance complexities.

Coworking space 1

There are already some Organizations helping Gig Workers.

The gig economy has a different level of income; Programmers may make a high income that can let them have some funds for rainy days. There are lower-income gig workers like domestic help are much more vulnerable.

“The National Domestic Workers Alliance” NDWA  is a Google and some partners investment.  Alia was created to help protect this group. The way Alia acts is being an intermediator between workers, their clients, and insurance providers. It starts by the worker asks its client to contribute a small amount like $5 per cleaned house. Then the money is used to purchase disability, life, and other insurance as well as paid time off.

New York’s Black Car Fund, offers the professional limo drivers that are members, life insurance, and compensation. Their service is including Lyft drivers that add a surcharge to each passenger’s fare and this way funds the coverage.

“Either society tolerates the trade-offs of a more flexible work force—where it is sometimes unclear who pays the medical bills when a freelancer is injured, and where there is no such thing as “paid time off” for disability or bereavement—or a new social contract is constructed.” — AIG

The non-profit Freelancers Union is offering its members as a group to be insured via Trupo. Gig workers pool their funds to cover sick pay during illness or injury recovery. “By joining Trupo, you’re not just insuring your independence,” maintains CEO Sara Horowitz. “You’re joining the very community that’s building the next social safety net.”

Insurtechs are also targeting the gig economy. Stride Health’s platform enables Uber, Care.comPostmatesEtsy, and other sharing economy workers to find appropriate health coverage.

Coworking space 2

While these non-profits and for-profits tackle the issue of gig worker benefits, lawmakers weigh in as well. In some areas, politicians are pushing for improved worker protection and portable Sociale benefits.

“If we don’t have a social contract for this workforce, if we don’t have social insurance that moves with workers, then I feel like the economic discontent, and economic insecurity that comes from working with no safety net under you would rise dramatically,” asserts American Senator Mark Warner.

Take the time to watch this video about Professor Paul Oyer, “The Gig Economy: Threats and Opportunities for Workers and Employers”

History can show us how human race technologies evolved, and working relationships were changed. Our turn now is to adapt the technology and make the right changes in the ways we exchange work for money and other benefits.

If you are a gig worker, stop for a minute to think about all the factors of life and work, health and family. If you are using gig workers, do not forget that they need to give fair pay that will permit them to purchase their benefits and have a good lifestyle.

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Disclaimer: John Wolf and paystubmakr.com are making a total effort to offer accurate, competent, ethical HR management, employer, and workplace advice.  We do not use the words of an attorney and the content on the site is not given as legal advice. The website has readers from all US states which all have different laws on these topics. The reader should look for legal advice before taking any action.  The information presented on this website is offered as a general guide only.

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