Closing the Gig Gap: The Push for Specialized Insurance in the App-Based Economy | Insurify

The gig economy has grown rapidly, giving millions of Americans the chance to work as freelancers and contractors and in remote roles. More than 10% of the American workforce uses the gig economy as their primary source of income, according to Gig Economy Data Hub.

But even with this stunning growth, there's still a big gap in the gig economy: insurance.

"More than half the US workforce is expected to be freelancing or contracting by 2027," says Brennan Kolar, senior financial analyst and founder of Atlas CPA Index, in Washington, D.C. "Most of them right now are either working without insurance or paying for annual policies built for full-time businesses."

An estimated 35% of U.S. gig workers lack health insurance, according to a study by Stride Health. Disability and income protection are even less common. Without these, one injury or illness could mean losing months of income with no backup.

Other insurance gaps are common for gig workers

Most personal auto insurance policies don't cover drivers while working as gig workers. This means a driver's standard policy isn't likely to cover an accident that occurs while the Uber or DoorDash app is on. Uber and Lyft offer some coverage when drivers have a passenger, but neither the rideshare platforms' insurance nor the driver's personal auto policy covers the time the app is on before the driver accepts a ride.

Workers who move goods or equipment for their jobs face similar problems.

"The coverage gap that catches a lot of gig workers is their tools and equipment," Kolar says. "If you're a contractor who drives your tools to job sites, your homeowners or renters insurance probably doesn't cover them while they're in your truck or at a client's location."

Are solutions coming?

Despite these gaps, Kolar says he's seeing signs that the industry is adjusting to the changing economy.

"The insurance companies gaining ground are the ones building coverage directly into the apps where the work gets booked," Kolar says.

New insurance technology companies are creating policies just for gig workers. Some traditional insurers, like Progressive and State Farm, now offer rideshare add-ons to help cover drivers. In some cases, hybrid policies are available that automatically switch coverage based on whether the rideshare app is on or off.

Thimble Insurance helps small businesses get general liability insurance. It was among the first to offer job-based, monthly, and yearly policies. The policies quickly became popular with caterers, DJs, and videographers. These workers often have breaks between gigs and don't want to pay for insurance when they're not working.

The gig economy affects home and renters insurance, too

Independent workers who run a business from home, including taking client calls, storing equipment, and doing freelance work, can risk invalidating parts of their homeowners or renters insurance.

Most personal policies don't cover business equipment or liability for a home-based business. In such cases, a separate business property endorsement or an inland marine policy can cover the gap.

What's next? The (continued) rise of usage-based insurance

The insurance industry has always made use of usage as a tool to evaluate risk and set rates, but the concept has garnered even more attention in recent years.

Usage-based auto insurance, also known as telematics insurance, lets drivers pay based on how many miles they drive and their driving habits. This can save them money compared to a flat rate. It also helps separate personal and work driving risks for gig workers who often drive for their jobs.

"The most viable development that would suit smaller operators is usage-based and project-specific coverage," says Michael Benoit, founder of California Contractor Bond & Insurance Services. "A contractor who accepts seasonal work or works at variable volume throughout the year has the advantage of being bonded and insured on a particular job as opposed to having an annual policy that is not representative of real activity."

Increasingly, the platforms that gig workers already use are offering insurance right inside the app. Instead of people searching for a policy, platforms like Uber and Upwork now show coverage options when workers sign up or start a shift, allowing gig workers to keep their work, and their coverage, in the palm of their hand.

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