Insuring the Gig Economy

The gig economy is becoming a significant source of youth employment in developing countries. In Africa, there are an estimated few hundred gig platforms employing millions of youth. With the rise of ride-hailing, food and parcel delivery services in Ethiopia, the past decade has seen quite a shift in the availability of gig work. The ride-hailing sector alone employs over 40,000 people. 

 An article published by Next billion exploring the ins and outs of providing insurance to those employed in the gig economy indicates that the design of such products should be informed by behavioral and human-centered research.

The gig economy is becoming a significant source of youth employment in developing countries. In Africa, there are an estimated few hundred gig platforms employing millions of youth. With the rise of ride-hailing, food and parcel delivery services in Ethiopia, the past decade has seen quite a shift in the availability of gig work. The ride-hailing sector alone employs over 40,000 people. 

More recently, the economy has seen the introduction of specialized gig platforms that connect gig workers with potential employers. 

Despite the gig economy’s enormous potential for growth globally, gig workers often face a lack of jobs and social benefits (including pensions and insurance). Governments also often miss out on collecting additional tax revenue from the growing number of gig workers. 

The article outlines that traditional insurance firms hesitate to provide policies to gig workers due to: 

       –       Poor and irregular pay

       –       Inconsistent cash flow

       –       Lack of (structured) employment contract.

These challenges mean there are only a handful of insurance products available that can address the unusual nature of gig work.

The article goes on to suggest the development of microinsurance policies tailored to gig work through behavioral research and human-centered design approaches as a possible solution. A trial assessed risks associated with gig work and their respective causes. These included personal injuries and accidents, loss of revenue, personal indemnity for work completed, and income equalization for regular expenses. These risks can stem from occupational hazards, illness, disability, negligence, lack of experience or economic downturns. 

The study concluded that insurance providers can sustainably cover the risks by:

       –       Responding to the flexibility of workers’ gigs: having an on-demand coverage option that allows workers to pay premiums (based on their expected number of gigs per year/month) only when carrying out gigs.

       –       Digitalization: considering the use of technology in the entire process reliant upon the tech savviness of gig workers. 

       –       Affordability: Offering affordable and dynamic pricing through differential pricing and payment models. For instance, using a liability sharing model whereby both gig workers and gig platforms contribute the premium payment to reduce the overall cost of insurance. 

Some providers have already begun applying the recommendations put forward by the study.

Read the full article here

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