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The gig economy in Canada is growing at an extraordinary rate. Almost one-third of the current Canadian workforce is made up of non-traditional workers and that figure is expected to rise to almost 50% by 2020.
Whether the work is simply a ‘side hustle’ or a number of gigs strung together to create full-time work, traditional employer-employee relationships are heading towards extinction and the traditional commercial insurance and risk management space is being shaken and stirred.
“This boom in the number of Canadians working as independent contractors is driving a demand for commercial insurance policies based on much lower revenues,” commented David Hamilton, CEO and president at Vancouver-based brokerage, Front Row Insurance. “For example, an independent graphic designer is going to have less work and less revenue than a company of 10 graphic designers, and therefore is going to expect a lower insurance premium.
“That expected premium might be lower than traditional minimum premiums, which have made it worthwhile for a broker to underwrite a policy. How can a broker make a profit if they have a 20% commission on a $200 policy? If it takes an hour or two to put together a policy and you’re only making $40, you’re not even coming close to covering your overhead, never mind making a profit.”
Front Row’s solution to the broker profitability challenges of the gig economy is to automate the insurance process for some of the smaller, independent operators. Hamilton described automation as “the only way forward” because there’s very little for brokers to gain dealing with independent contractors on a traditional, custom basis.
The majority of gig economy workers also expect an automated, online insurance experience, Hamilton added. The nature of their work and the fact that they’re wearing multiple hats trying to run an independent business means that many gig workers engage with tasks like insurance purchases or renewals outside of traditional business hours. It’s more convenient for them to be able to do that online.
“I don’t think the Canadian market is adjusting fast enough to cover very small businesses and meet the requirements of gig economy workers in terms of offering a premium price point that’s acceptable,” Hamilton told Insurance Business. “There are still minimum premiums out there that are too high for most independent operators and there needs to be a shift to drive the price down to reflect the actual risk.
“If you’re a broker and someone from the gig economy calls you, you simply have to work hard and be prepared not to make a lot of money. I think moving forwards there does need to be a way within the industry to drive costs down and still be able to make money, while providing good customer service. The only way I see that happening is by automating a lot of the policies for gig economy workers.”
