As you might have read, Assembly Bill 5 became law in California in mid-September.
The law aims to update labor regulations to keep pace with the changing nature of work in the digital age by extending workplace protections to freelancers and other members of the gig economy.
Whether AB 5 achieves its aims or not, and whether other states adopt similar regulations, the bill’s passage is a major signal to the insurance industry that change, in some form, is coming to the regulatory landscape for “gig workers”—and not just in California.
This is going to create new opportunities. There are some insurance products available today that are specific to gig workers, like Allstate’s specialty coverage for Uber drivers, but we know that this is an underinsured market segment. Common coverage gaps include universal risks like workplace injury and unemployment, but also risks specific to gig work. For instance, if an Uber driver receives a poor rating on the app from a passenger, it may lower their ability to attract more work or end their work altogether.
There are no leading providers who are addressing that risk—yet. But it is only a matter of time until one of the dabblers commits more fully, or some insurance provider develops the products, channels, and experiences to pursue this market more effectively.
Self-employed work (or as the IRS calls it, 1099 work) will continue to exist, but the rules defining who is an employee and who is a true contractor are likely to shift. AB 5, for example, exempts many kinds of workers from its extended workplace coverage, including graphic designers, doctors, architects, real estate agents and many more.
This may present another new opportunity for insurers. If 1099 gig work persists as a popular employment model, it’s probable that firms like Uber will need to purchase insurance at some point. Providing those policies could be a major source of new business for insurers.
It’s important to stress that both opportunities are still developing. There’s a lot that could change before they arrive in the marketplace.
But as we’ve seen repeatedly, today is the best time to start thinking about capitalizing on tomorrow’s opportunities. Insurers interested in these new segments need to be considering:
- Product elements. Gig workers are neither full-time nor part-time employees. Their insurance coverage will have to reflect this, which means insurance providers will need to think through how to rate and cover them in a way that makes sense.
- Pricing. These new products are likely to need flexible pricing structures and may need new policy and billing systems to support real-time adjustment.
- Systems. Many major employers of gig workers have access to huge amounts of real-time data about their workforce and their operations. Insurers that can integrate with their systems and create valuable insights from their data will be well-positioned to seize these opportunities.
The high-level takeaway from the passage of AB 5? The key question about greater regulation is not “if” but “when.”
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