The rise of the on-demand (or “gig”) economy (like drivers who provide rides via Uber or Lyft) is not only changing the way its participants work, it is also changing how companies provide insurance to those participants.

A recent article in the Economist provides this example: A courier hits and injures a pedestrian.

  • If the courier company employs the driver and provides the worker a van and salary, the accident would be covered by a standard commercial insurance policy.
  • But on-demand “gig” couriers, who use their own cars and work whenever they choose, must often insure themselves. Even if the courier has personal insurance coverage, it will not usually pay out for accidents that happen while they are driving for work. If the coverage is available, it can be expensive.

This isn’t a problem, it’s an opportunity

Insurance by the hour | The UK startup, Zego, brokers third-party liability insurance for couriers who pay for the insurance by the working hour. Coverage starts when they activate the courier’s smartphone app and stops when they sign off.

Insurance by the mile | Uber drivers, through the insurance broker Aon, can purchase coverage against illness, disability, and death for as little as $0.04 for each mile they drive. If local regulations allow, Uber will raise the rate it pays drivers by the same amount, making it look like an employment benefit but in the context of an independent worker approach.

Insurance by stages of risk | In Ontario, Uber and Lyft both have brokers who have packaged a “three-stage” approach.

Stage 1 | Kicks in when a driver launches the Uber (or Lyft) app.
Stage 2 | Higher coverage, starts once a ride is accepted.
State 3 | Even higher coverage when passengers are picked up until they are dropped off.

Insurance by the user | Since 2011, Airbnb has offered a “host guarantee” against theft and vandalism. While it works like insurance, no third-party firm is involved. Airbnb makes payouts itself.


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