While the digital revolution is taking a toll on many traditional industries – media, financial services, retail and more – the news from the new economy isn’t all about industries that are shrinking: it’s also a growth story as many new industry sectors and jobs emerge. So what are the opportunities for the astute insurance agency to tap into?
One obvious growth sector is the emerging “gig economy.” What exactly do people mean when they refer to the gig economy? There is no one agreed-upon definition so the term is used somewhat differently from person to person. Many people are talking about emerging jobs, such as Uber and Lyft drivers, or sharing economy industries like Airbnb; others simply mean independent contractors or freelancers.
Last year, the Bureau of Labor Statistics (BLS) tried to wrap their arms around just what is meant by the gig economy and just how many people could be classified as working in this emerging sector. They define a gig as “a single project or task for which a worker is hired, often through a digital marketplace, to work on demand.” That would fit such jobs as Uber and Lyft drivers, but it might encompass many other workers. BLS goes on to say:
“Gig workers could be in contingent or alternative employment arrangements, or both, as measured by BLS. Contingent workers are those who don’t have an implicit or explicit contract for long-term employment. Alternative employment arrangements include independent contractors (also called freelancers or independent consultants), on-call workers, and workers provided by temporary help agencies or contract firms.”
The last time BLS collected such numbers was 2005 and note the intent to update the numbers this year, but a McKinsey study says that official data is significantly lagging the reality. They report that 20-30% of the work force is now made up of independent workers.
“How big are the gaps? While the percentage of independent workers in the U.S. is 27% by McKinsey’s estimate, it was 22% according to government data and other published surveys the institute analyzed. McKinsey estimates that the total number of of independent workers in the U.S. is now 54-68 million. There were 159.9 million workers in the civilian labor force in September.”
Many legislators and insurance industry insiders are thinking about how to meet the demand of new insurance coverage for gig workers and independent contractors. Denise Garth of Majesco identifies opportunities that this emerging sector of employment holds for insurers in her blog post: The Gig is Up: Group and Commercial Insurers Can Rock the New Economy. She notes that many of these jobs will transition into businesses for aging Millenials and retiring Boomers:
The Kauffmann Foundation’s statistics on entrepreneurship indicate that the “peak age” for starting a business in the US is around 40. Millennials are on the cusp of mass entry into the “peak age” bracket for entrepreneurship. They show a strong desire to start businesses. By 2020, more than 60% of small businesses in the US will be owned by Millennials and Gen Xers.
Baby Boomers are reaching retirement age in ever greater numbers. As they move to retirement, some will seek “gig economy” businesses and jobs to supplement their income. Many will start their own businesses. For those who already own their businesses, they will potentially pass them to the next generation. For those starting a business, this represents a growing new segment.
She says that this, in turn, should lead to new opportunities, such as new potential “affinity” groups with insurance opportunities for both Group carriers and Commercial insurers, and while liability may replace some personal lines business, there may be new opportunities in pooled risk.
Agents will need to be alert for the opportunities in emerging trends, as well as for new insurance products, services and arrangements.