Insuring the rapidly growing gig economy amid a global pandemic

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The Zebra

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The Zebra is an independent insurance advisor and quote comparison site with headquarters in Austin, Texas. Utilizing its real-time quote comparison …

The U.S. saw a boom in the “gig” economy in the past year largely due to COVID-19 putting people out of standard jobs; 36% of US workers consider themselves as freelancers or independent workers. This growth has created challenges for the auto insurance industry since these workers don’t necessarily fall under any specific underwriting models. 

Approximately 57 million people are employed as independent workers, with the rate of gig workers predicted to reach 50% by 2027. A subset of these gig workers drive for rideshare businesses like Uber (TNC drivers), and don’t necessarily have a livery driver’s license; their cars are often not registered or insured as commercial vehicles because they don’t qualify. 

Buckle, an insurtech specifically targeting rideshare drivers, recently launched in Georgia and Tennessee and has more states on the docket. With an intent to streamline and simplify the process of people turning personal vehicles into revenue-driving opportunities, Buckle uses non-traditional data resources available on gig workers that traditional insurers do not have access to, allowing the company to provide affordable coverage to a new risk class that falls in between non-prime and deep sub-prime

The way Buckle approached auto coverage differs from the way legacy insurers have worked with ridesharing, as carriers such as AllstateLiberty Mutual and Farmers provide policy add-ons and endorsements that you can opt into when evaluating a policy since most traditional policies aren’t designed to cover livery. Carriers specifically provide coverage from the times drivers open the app, pick up the customer and complete the trip. On average, adding rideshare coverage to an existing policy increases your rate by 15% in 2021. Geico on the other hand replaces a driver’s personal auto insurance policy with a policy that combines personal and business coverage, meaning a driver is covered whether the rideshare app is on or off

By using telematics data from TNEDICCA, Buckle calculates risks based on actual accident hotspots around a specific location, making auto insurance pricing fair and less dependent on credit score and eliminating the need for add-ons or endorsements. 

As the popularity of ridesharing dropped due to travel restrictions in 2020, the gig economy boomed in the food delivery industry. Rideshare companies like Uber changed their business models to accustom running food instead of people. UberEats saw delivery go up  128%, nearly out-earning the rides business. Traditionally,  car insurance companies consider food or package delivery as “business use” and “business use” as a higher risk than personal use, so rates tend to be higher. Some carriers like Progressive have reacted to this market by bundling gig jobs under one policy called courier insurance, which includes a variety of on-demand services like ridesharing, food delivery and grocery delivery, and serves as an add-on to an existing personal auto policy. State Farm, on the other hand, suggests grocery delivery and food delivery do not need to be covered or insured and only require a lower-cost “business-use” designation

As legacy carriers develop policies and endorsements around the specifics, it’s important to consider how companies like  Buckle are finding ways to keep insurance premiums low for those workers that don’t necessarily qualify but also make sure they’re covered. Regardless of who the carrier is, gig workers should be transparent with their insurers and employers to mind the gap.