Embedded Insurance: How Employee Benefits Carriers Can Capture the Gig Economy

The Automated Insurer | Digital Transformation

By Mike de Waal | 13 January 2023

Key Points

Gig workers, side hustlers, and freelancers are increasingly fueling the broader economy. Embedded insurance provides an opportunity for employee benefits carriers to capture this gig working market.

Key ways embedded insurance can help carriers capture this market segment covered in this article:

  • Bundling insurance products together
  • Forming strategic partnerships with online gig work platforms
  • Enabling direct mobile sales channel distribution
  • Creating more flexibility in coverage options

While half the U.S. population gets health insurance through an employer, more than one-third of the labour force works in the gig economy full or part-time. A trend that exploded during the pandemic, gig work is here to stay.

For gig workers and freelancers, independent work offers flexibility and earning power but leaves these workers without the comprehensive employee benefits expected in traditional employment.

Of course, these individuals can arrange their own individual coverage, but many don’t, and this demographic is showing signs of being underinsured across multiple lines of business.

Embedded insurance provides an opportunity for employee benefits insurers to capture this market. With embedded insurance, carriers can bundle products together, enable direct mobile sales channel distribution, and offer relevant, affordable, and flexible coverage to this underserved market.

The same Upwork study finds that 60% of people who had recently taken up freelancing or gig work say that a salary increase would not convince them to retake a traditional job.

What is Embedded Insurance?

Embedded insurance is when insurers partner with other businesses to embed risk protection and insurance coverage into consumer journeys.

Embedded insurance is becoming common in P&C lines. For example, in 2020, Nationwide Insurance partnered with Toyota to offer embedded usage-based insurance (UBI) exclusively to Toyota drivers using telematics technology.

The rise of embedded insurance is linked to technological advances from digital ecosystems and application programming interfaces (APIs) that tie them together. Today, carriers can provide seamless connections to digital platforms for any business through cost-effective microservices.

This technology trend is supporting massive gains in insurance customer self-service, and greatly simplifies the customer journey (you’re buying two products at once). As a result, insurance distribution strategies are being designed to offer insurance in as many contexts as possible, as simply as possible.

Embedded Insurance Within Online Gig Platforms

Gig workers are often tech-savvy and independent people who schedule their daily lives and jobs through online marketplaces and mobile task-based platforms. In fact, one study finds that over 70% of freelancers find their next gig through online platforms.

Partnering with online markets and task-based platform companies presents a sizeable opportunity for group benefits insurers to provide coverage to large groups of freelance users at scale.

For instance, Stride Health, a web-based insurance recommendation platform for independent workers, launched a partnership with Fiverr, an online marketplace for freelancers. The partnership enabled Stride Health to capture new markets while providing Fiverr’s users with personalized recommendations for healthcare plans.

Embedding insurance into digital task-based platforms and online markets can help benefits insurers acquire new customers at the point of sale rather than spending money on expensive marketing campaigns for individual freelancers.

In addition, when effectively embedded in digital platforms, insurance products can offer a strategic competitive advantage to insurers and their partners. It can create trust and loyalty amongst online markets’ user base by providing more benefits to users, which keeps them returning to their platform.

Optimizing Coverage to Fit Gig Workers Needs

To capture new gig worker market segments, carriers must adapt their coverage options and distribution strategies to appeal to the needs of gig workers.

For example, Goose, a Canadian insurtech, is now working with AIG Insurance to help offer affordable income protection insurance and hospital cash policies for self-employed and gig workers.

Enabled by open APIs and Goose’s self-service distribution app, small business owners, gig workers, and freelancers can purchase protection independently on their mobile devices in minutes.

Many gig workers want products that protect them for shorter periods, such as day-to-day, month-to-month, hour-to-hour, or contract-to-contract. Therefore, creating more flexibility in coverage options and how gig workers use insurance products could hugely impact how this generation views the benefits of insurance policies.

Employee benefits insurers must make buying insurance coverage as seamless and effortless as it is for them to schedule another gig. As a result, more employee benefits carriers offer portable benefits for gig workers that provide swift and straightforward application and enrollment processes.

Bunker, an online instant business insurance platform for independent contractors and businesses, allows workers to purchase insurance for just the term of their work contracts, enabling more flexible and meaningful coverage for gig workers. The company offers products such as occupational accident insurance, which covers on-the-job accidents that might not be covered by traditional policies.

Cover Genius, another insurtech, has embedded policies within several gig worker platforms and marketplaces, integrating insurance in the signup process and providing the ability to turn coverage on and off.

Additionally, small businesses and companies that rely on contractors because they cannot afford full-time employees can use embedded, usage-based insurance to secure a more reliable talent pool and increase contractor retention.

Embedded Insurance Can Help Capture The Gig Work Economy

Gig workers, side hustlers, and freelancers are increasingly fuelling the broader economy. Employee benefits insurers have a major role to play in building a safety net for these workers, and we are only just getting started.

Embedded insurance will continue to be an effective form of digital distribution, as the embedded insurance market is projected to reach $3 trillion by 2023. According to Denise Garth, Chief Strategy Officer at Majesco, 40% of insurance will be embedded in the next 10 to 20 years.

Insurance companies can remain highly competitive over the next ten years by leveraging APIs, partnerships with insurtechs and online gig platforms, and designing seamlessly embedded digital insurance journeys for customers.

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Mike de Waal

Mike de Waal is president and founder of Global IQX, an Ottawa-based software provider of AI-driven sales and service solutions to employee benefits insurers.  He has deep experience in both software development and business management skills. Early in his career, he worked as a computer programmer and then went on to become a financial planner and a benefits consultant with giant Manulife Financial before becoming a tech entrepreneur.  He can be reached at [email protected].

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