The significant cost of insurance for using your vehicle for work pushes many workers out of the market.

The innovation of these smaller firms is to offer insurance by the day or hour rather than for a full year, and for a correspondingly smaller, less intimidating price. If a driver you insure is part of a very expensive claim then having charged them a bigger, annual sum upfront is not going to make much difference anyway.

Trade unions and the government appear to have been quicker than the large insurance firms in offering bespoke cover for workers who might only need to be insured for the few hours a week they work as a Lyft driver or Deliveroo deliverer.

To be fair, the growth of the self-employed sector has happened quite quickly, the government only issued its response to the Taylor Review of conditions for gig economy workers last year. A spate of court cases around the legal status of gig economy workers have hit the headlines since the Taylor report was released in 2017.

In June research from the University of Hertfordshire out the size of the gig economy workforce at 4.7 million, double what it was in 2016.

It took people from this industry who were finding getting their staff insured a real problem to enter the market to start to change things, at least in the UK.

Zego founders

Co-founder and CEO of Zego, Sten Saar had worked at Deliveroo and said the cost of insurance was prohibitive for many of its drivers.

Drivers would be all ready to sign up and then find they could only buy insurance for a whole year, at around £2,500, and never come back, he said.

“Let’s say you buy a policy from Zurich, annual [cover] is all they do,” he says. “Some insurers can do 30 days but that is all.

“We are removing the barriers into markets where people want to work part-time jobs.”

Why have the big firms not reacted substantively to this change in the workforce?

“Why would they?” says Saar “If their revenues are growing and number of customers are growing each year anyway, this is easy to miss.

“Although we are growing rapidly, we are still small. Our numbers are a drop in the ocean compared to them."

The insurtech sector for gig economy workers looks to be where online banking was three or four years ago, before companies like Monzo disrupted that market significantly.

The pace of change is likely to accelerate still further.

Saar adds: “The way people work, the way they move around, this has all changed. The big firms are still using this archaic infrastructure that was built up in the 60s and 70s.”

Asked if they have caught up at all in the three years since Zego was founded, he answers simply “No”.

The firm operates in five European countries and is looking at getting into the huge commercial fleet insurance market.

“Ben Kaminski from Target Global said there was almost “limitless” potential for the firm.”

It is looking to double headcount over the next six to 12 months and already has its systems embedded in household name gig-economy firms like Uber, Deliveroo and Canugo.

There are approximately 90,000 Uber drivers in London alone.

In late July the company announced a partnership with Splend, the Uber-leasing firm who recently relocated to London.

The same month a partnership with European firm Dott saw Zego insure the former’s fleet of shared e-scooters across France and Belgium.

In June one of the company’s investors told the business press incumbents would find it difficult to replicate the business model in time to take advantage of the gap in the market for new mobility services, where people hire vehicles for short periods rather than buy them outright.

Ben Kaminski from Target Global said there was almost “limitless” potential for the firm.

The health and insurance situation is different from country to country, with UK workers covered by the National Health Service (although the Taylor Review said the fact that gig economy employers do not pay national insurance on behalf of their workers was “the £60bn elephant in the room”).

There is an even more pressing need for health cover for freelancers in the United States where employers have traditionally provided the bulk of health cover.

Am American insurtech Trupo, recently launched products for freelancers, offering accident insurance, specified disease and cancer insurance.

“Back on the other side of the Atlantic there are some signs of innovation from the more traditional insurance market.”

Founder and CEO Sara Horowitz said many young workers had never had a job with an HR department that offers benefits: “we want to fill this tole by offering the advice, information and most importantly vetted insurance policies to meet their individual needs.”

Like Zego, Trupo was co-founded by an insurance industry outsider, in this case from the Freelancers Union, who had seen a gap in the market.

Back on the other side of the Atlantic there are some signs of innovation from the more traditional insurance market.

The Future at Lloyd’s report released in May set out the new strategy for the historic insurance and re-insurance hub, specifically around financing and a system to allow less complex risks to be covered in minutes and “at a fraction of today’s costs”.

These last two points indicate a growing awareness of the frustrations that prompted the founding of Zego, Trupo, and US contents insurer Lemonade.

Nick Pester, partner at Capital Law, which represents Zego, believes the document was quite forward-looking for Lloyd’s, and that the changes to the way people were employed had created a “huge” gap in the market.

“Some estimates put it at 30% of people being employed in the gig economy within five years,” he explains. “That is very much the way the employment market is moving.

“Meanwhile the [traditional] insurance product has been around since the dawn of time, this is a completely different way of working”.

He predicted changes in the way these ventures were funded also, with eight to 10 smaller investors taking stakes of around 10% each.

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