Freelance Economy Part Two

By Harry J. Lew

Need prospects? Then consider targeting people who either find their own work or participate on a gig platform. You’ll find they have gaping holes in their insurance safety net.

More people are working in freelance jobs today than ever before. These include so-called gig workers on platforms such as Uber and TaskRabbit, as well as independent contractors who seek out 1099 engagements.

Although these arrangements bring many advantages, they also pose downsides such as unpredictable income and lack of employee benefits and other essential insurance.  As discussed in the first part of this series, the latter disadvantage creates big opportunities for insurance agents. Are you ready to leverage them?

In our prior article, we discussed how the financial reality of independent work might disappoint some workers. Not only do gig employees have less income than workers who do platform work plus a conventional job (or those with traditional jobs alone), they also have a weaker financial safety net. For example:

• Only 40 percent of gig workers have health insurance, with even less ownership for dental, life, and short-term/long-term disability insurance.
• Only about 18 percent of gig workers have insurance to protect them against the liability risks of damaging property or causing personal injury or of not being able to work due to an occupational injury or illness.

The picture is equally bleak when it comes to retirement savings. According to the U.S. Bureau of Labor Statistics, only 7 percent of temp-agency workers, 30 percent of employees without regular hours (“on-call” personnel), and 38 percent of independent contracts participate in an employer-sponsored pension plan. That compares to 46 percent of traditional employees.

These statistics and others reveal a dynamic segment of the U.S. labor market that provides independence, yet saddles workers with financial stress. According to Prudential’s “ Gig Workers in America” study, only 50 percent of gig-only workers and 51 percent of gig-plus-conventional-job workers believe their finances are secure. That compares with 59 percent of regular full-time workers.

Freelancers are good prospects

So are gig workers and other independents a good target market for insurance agents? One might be tempted to dismiss them because they may lack disposable income. However, one can also argue that people with a frayed security blanket will have more financial anxiety than conventional workers. In turn, this will make them more receptive to agents approaching them with solutions to help reduce that anxiety.

What’s more, even though you might not be able to make one high-commission sale to them now, you might be able to set yourself up for years of continuous sales as prospects become more affluent over time.

Finally, selling to freelancers creates big cross-selling opportunities. That’s because they have risk exposures across many different insurance categories:

• Health
• Disability
• Dental and vision
• Life
• Liability
• Worker’s Compensation

The latter two products are especially relevant to freelancers on gig platforms such as Uber or Upwork. They need to mitigate work-related liabilities such as customer lawsuits or protect against income loss due to an occupational injury or illness.

Given these opportunities and the fact that the more insurance policies you sell to a customer, the more persistent and profitable the person’s account will be, it makes sense to focus on freelancers as a high-potential target market. But how do you begin pursuing these prospects? Step one is figuring out what type of freelancer you’re dealing with.

Many will be traditional freelancers such as independent business consultants, graphic designers, copywriters, business consultants, and the like. But others will participate on gig platforms such as Lyft or HomeAdvisor that generate projects for them. The gig category further breaks down into those doing gigs exclusively and those using them to supplement income from traditional full- or part-time work.

Insurance needs of independent freelancers

Prospects who generate all their income from freelancing and who do not have insurance or other benefits from a spouse or partner represent almost unlimited sales opportunities. Your goal? To schedule an initial fact-finder to identify risks, to get agreement on addressing one or several major risks, and then to set the stage for future sales.

In your initial meeting, consider following this track:

• Health insurance: probably the biggest worry freelancers have.
• Disability insurance: a significant risk most independent workers fail to address.
• Life insurance: for freelancers with dependents, a key way to assure a surviving family’s financial security after a breadwinner dies.
• Dental and vision: second-tier risks, yet still important due to the role of oral health and vision in maintaining health and well being.

For health insurance, probe for pain points about their existing coverage or lack of coverage. Get them talking about what they want from their health insurance. For those that already have it, see what they’re currently paying in premiums and what their total out-of-pocket expense is. Also determine whether they’re able to see the providers they prefer or are paying too much for out-of-network care. Then check to see if their current plan’s drug formulary is forcing them overpay for certain prescriptions.

Advise those without health insurance to consider free or low-cost government coverage (VA, Medicare, Medicaid, Children’s Health Insurance Program [CHIP], and subsidized Affordable Care Act (ACA). If those aren’t possible, review other options such as getting on a spouse’s plan or securing coverage via COBRA, non-subsidized state or federal ACA exchanges, professional associations, Freelancer’s Union, or short-term health plans.

Note: in the first meeting, the goal isn’t to solve the freelancer’s health insurance risk, but rather to highlight the options available, sell your expertise, and secure a commitment to another meeting about finding the right coverage. The same is true for the other insurance types mentioned above. By keeping the discussion high-level and focused on multiple pain points, you’ll increase your odds of selling many future insurance policies to the freelancer.

For disability insurance, independent workers lacking coverage may not see that as a problem. Educating them on the impact of a lengthy disability (and resulting loss of income) on one’s finances is important. For example, tell your prospects it’s more likely they’ll get disabled due to illness, not an accident. And 25 percent of today’s 20-year-olds will get disabled for at least a year before they retire, according to the Council for Disability Awareness. The challenge: to consider how they’ll pay their bills if they can’t freelance for several months or under a worst-case scenario, for a year or perhaps, ever again.

As with health insurance, there are many sources of disability coverage. Freelancers who experience a severe disability that is expected to result in death or will likely last for 12 months or more can apply for Social Security Disability Insurance (SSDI). However, this requires meeting a stringent disability definition: not being able to work in any substantial gainful activity. This means a skilled IT consultant would not be considered disabled if he or she could work at Walmart.

Since SSDI is hard to get, shift the discussion to the importance of short- and long-term disability and coverage sources in the commercial arena. Encourage the freelancer to check out DI options available through their professional associations. If the person doesn’t belong to such a group, then explain individual-policy options available from specialty disability insurers.

As with disability insurance, freelancers may not think they need dental and vision insurance. In fact, many are fine with funding dental and vision care out of pocket. But probe to see what what they’re spending now and how much those expenses have grown recently. You might be able to convince them to purchase their own dental/vision insurance. Dental protection is especially important because problems with teeth or gums can trigger heart disease and other illnesses in the future. Regular preventive dental care will help freelancers stay healthy and prevent having to spend a lot of time and money on getting dental care.

Freelancers without a steady income might resist buying life insurance. Yet those with dependents should understand the risks their families will face should they pass away. According to the National Funeral Directors Association (NFDA), the average full-service funeral costs $8,755; cremation only costs $6,260. With roughly one in three Americans having less than $1,000 in savings, many of your freelance prospects will quickly see the need to buy life insurance.

The good news: countless sources of low-cost term life insurance are available for freelancers. Traditional life insurers will have dozens of product alternatives. Some of the current insurtech platforms (e.g.: Bestow) will compensate you for referring your prospects to their term life online applications, which feature simplified underwriting. When they buy, the platform will pay you a commission.

It’s also important to discuss life insurance with “gig plus” workers—i.e., those with a traditional job who supplement their income with gig work. Why? Because they typically will only have one to two times their salary in group life protection, and only a minority will have opted to boost their coverage with voluntary life insurance.

Property-casualty opportunities

Any insurance discussion with a freelancer or gig worker should touch upon various property-casualty insurance policies. Here are the main ones:

Business liability insurance: General liability insurance is essential for all freelancers who worry about getting sued for third-party bodily injury or property damage or for losses arising from product liability or advertising injury. Similarly, freelancers whose negligence might financially harm a client should also consider buying professional liability insurance. If they also own business property, they can save money by combing general liability and commercial property coverage into one convenient and cost-effective Business Owner’s Policy (BOP).

Worker’s compensation insurance: Workers’ compensation insurance is legally mandated for most freelancers who have employees or who do work for clients who require a certificate of insurance in order to do business. Plus, freelancers who do risky physical labor might want to purchase workers’ compensation to protect their ability to generate an income. That’s because their health insurance and disability insurance policies won’t cover job-related injuries or illnesses.

Ridesharing insurance: prospects who drive for Uber, Lyft, or other transportation network companies (TNCs) have unique insurance concerns. They drive people for money, which poses risks if they get into an accident that injures or kills someone. The problem is, their personal auto insurance won’t cover them because they’re using their personal vehicle for commercial purposes. So why not buy a commercial auto insurance policy? Because those policies are much more expensive and make no sense for part-term workers.

TNCs will typically provide insurance for their drivers. But this coverage only provides for limited liability protection ($50,000 per person, $100,000 per incident, $25,000 property damage) when workers are logged onto their TNC app and waiting for a ride request. Full liability coverage (up to $1 million) only kicks in after they accept a “hail” and are on their way to pick up a passenger. TNC coverage also provides uninsured/underinsured motorist protection and comprehensive/collision coverage.

Full protection lasts from pick up to customer drop off. Now partial coverage returns. Fortunately, a number of insurers provide “rideshare” insurance to fully cover the “waiting-for-a-hail” gap in TNC-provided insurance.

After probing gig drivers’ insurance concerns, help them select the right solution. Many of the major personal-lines auto insurers today offer rideshare insurance. These include Allstate, Erie, Farmers, Geico, MetLife, Progressive, State Farm, Travelers, and USAA. Some insurers sell modified commercial policies for ridesharing drivers, while other amend their personal auto coverage. In either case, premium levels vary, and availability is still spotty across the country.

As of this writing, only one dedicated ridesharing insurer exists. Called Metromile, it bases its fee on how much the insured actually drives, not on a fixed premium. For prospects who work a limited number of hours per week, Metromile might be the most cost-effective solution.

Home-sharing insurance: Many Americans use their homes, condos, or apartments to make extra money on platforms such as HomeAway and Airbnb. However, the minute they rent out their property, their personal homeowner’s policy no longer applies. So if a guest gets hurt or suffers property damage, the owner will have to provide for his or her own legal defense and to pay for any legal judgments or settlements.

Some home-sharing networks are filling this gap by providing insurance to their hosts. Airbnb, for example, gives its property owners two forms of protection: Host Guarantee and Host Protection. The former covers up to $USD 1 million in damage to a host’s property resulting from an Airbnb booking. The latter covers up to $1 million in third-party liability claims for both property damage and personal injury.

When discussing home-sharing risks with prospects, it’s important to determine which listing service they use. Those on Airbnb have fairly comprehensive coverage. But those using services such as Tripadvisor (no insurance at all) and HomeAway (only liability insurance) may need to supplement their protection. In this case, you can work with prospects to determine if their personal homeowner’s insurance offers a home-sharing endorsement.

As you explore personal and business risks with freelancers, remember what we said earlier. Keep your conversation high level and wide ranging. In other words, surface as many insurance needs as possible and then prioritize those needs based on their concerns and ability to pay for insurance. Ideally, you should walk away with a follow-up appointment to solve one or several primary needs and with a laundry list of other risks to address over the next year or two.

Handling the meeting in this fashion will help you fully monetize your freelancer relationships despite their lack of disposable income today. If you do your job correctly, you will find that freelance America can be a highly profitable insurance market, indeed!