Insurance Challenges
Raised by the
Sharing/Gig Economy
Lori Lovgren, JD, CPCU
Division Executive – State Relations
© Copyright 2016 National Council on Compensation Insurance, Inc. All Rights Reserved.
Agenda
 Terminology: Sharing Economy and Gig Economy
 Proliferation of Platform Companies
 Insurance Challenges
 Looking Forward
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Rise of the Sharing Economy
Movement to share underused assets (i.e., rent or
borrow, rather than buy and own) stemming from:
 Population Growth
 Resource Depletion
 Financial Crisis
 Rising Income Inequality
 Growth of Information Technology/Social Media
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Closely Related to the Concept of Sharing
Economy Is the Rise of Platform Companies
 At the cutting edge of digital transformation
 Gaining ground through digitalization of products,
services, and business processes
 Matching users to providers of products or
services (including peer-to-peer marketplaces
connecting buyers and sellers even if sharing is
not involved)
 Some of the more commonly known platform
companies are Amazon, eBay, Uber, and Airbnb
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Business Model of Platform Companies
Has Contributed to the Gig Economy
Applications provided by platform companies allow
ordinary people to engage in “gigs” related to the sale of
goods or provision of services.
Other contributors to the “gig economy” are:

An increasingly mobile workforce (can work any time
from any location)


Worker preference for flexibility, i.e., work-life balance

The entrance of millennials into the workplace
Employers’ drive to lower costs (benefits, office space,
and training), particularly in an economic downturn
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Who Are the Gig Workers?
Most are freelancers and independent contractors.

Both similar – a person or business that offers goods or services to another
business through a contract or verbal agreement.

Freelancer - A freelancer worker does work that usually has to do with more
artist fields like planning events, technology, music, writing, etc. A lot of
freelance workers create their work and typically keep the copyrights to their
works and sell the rights to publishers usually in time-limited contracts.

Independent contractors - Jobs typically require labor instead of artistic ability.
Others which may be included depending on definition are:





Agency Temps
On-Call Workers
Contract Company Workers
Self-Employed Workers
Standard Part-Time Workers
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How Big Is the Gig Economy?


Studies depend on definition of “gig worker”

Freelancers Union study (2015) states that approximately
53M Americans, or 34% of the workforce, are freelancing;
that’s 700K more than last year

US Government Accountability Office (GAO) report (2015)
estimates that in 2010, 40% of workers were “contingent
workers”

BLS scheduled to conduct a survey on contingent and
alternative employment in May 2017
Action Forum study (2015) states that gig employment has
grown by between 8.8% and 14.4% from the early 2000s
through 2014 (faster than overall employment growth of
7.2% during same period)
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Insurance Challenges Created by Typical
Platform Company Model

Personal Lines

Space sharing



Car sharing


Most personal auto policies exclude vehicle rental for a
fee
Ride sharing


Traditional homeowners policy is not designed for guests
or renters
Landlord/rental property policy does not cover
contents/valuables
Personal auto policies exclude liability when auto is used
for livery
Workers Compensation
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New Insurance Developments
in Shared Space
 Airbnb—Host Protection Insurance (general
commercial liability policy) included at no
additional charge

Liability insurance for hosts covering injuries to
guests and property damage by guests

Excluded are intentional injuries and property
issues such as mold, bedbugs, and asbestos
 Other competitors:

HomeAway/VRBO—Sells vacation rental insurance
to homeowners

FlipKey—No insurance products available
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New Insurance Developments
in Car Sharing
Many of the car-sharing companies are providing
the following:
 Liability—A $1 million liability policy to the car
owner
 Collision and Comprehensive—Car-sharing
company pays for damage caused during rentals,
up to a maximum of the actual cash value of the
vehicle
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New Insurance Developments in
Ride Sharing
Depending on the state, Uber/Lyft may provide
Lower Limits Liability Only coverage (no collision)
for Period 1 and Liability/Collision for Periods 2 and
3. Collision deductible may be $1,000 (Uber) to
$2,500 (Lyft).
 Period 1—Online and without a ride request
 Period 2—Online and with a ride request (en
route to pickup, waiting for rider to come out,
etc.)
 Period 3—Online and with rider in car
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Ride Sharing Insurance Options
 Standard commercial coverage
 Some carriers provide coverage for Periods 1–3
(overlap with Uber/Lyft policy in Periods 2–3, but
personal policy could have lower collision
deductible)
 Some carriers provide Period 1 personal coverage
to fill the gap of Uber/Lyft
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Workers Compensation
and Platform Companies

Platform companies argue that they are merely
technology companies connecting users with desired
providers’ goods or services

The trend has been for platform companies to treat
service providers as independent contractors rather
than employees

If service providers are treated as independent
contractors, platform companies would not provide
benefits such as health insurance, 401(k) plans,
overtime or paid days off, or pay for state
unemployment or workers compensation insurance
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Distinguishing Between Employee and
Independent Contractor Status

Variety of tests
 IRS 20-factor test/right to control
 Economic realities

Depending on the applicable laws, the same worker could be an
employee and an independent contractor.


GAO report (2009) suggests millions of workers are misclassified.

Misclassification has significant financial consequences in terms of
back wages and overtime, legal fees, penalties, taxes, etc. If a worker
had a work-related injury and would normally have been able to rely
on workers compensation insurance, the worker may be able to sue
the employer in tort.
US DOL clarification on independent contractors (2015) has been
interpreted as suggesting that most workers are employees; this
could make it difficult for companies to use independent contractors.
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Ride Sharing: Are Drivers
Employees or Independent Contractors?
Employee
Independent Contractor
• Fares set
• Drivers screened
• Liability insurance
• Vehicle standards
• App matches drivers with
potential customers
• Drivers set their own schedules
• Drivers use their own vehicles
• Drivers work for multiple
companies
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Worker Status Debated in State Legislatures
Bills filed:

Creating or clarifying criteria for independent
contractors

Prohibiting the misclassification of employees as
independent contractors


Prescribing penalties for misclassification

Defining “Qualified Marketplace Contractor” as an
independent contractor
Establishing that drivers for Transportation Network
Companies are independent contractors
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Worker Status Debated in Class Action
Lawsuits Against Platform Companies
 Uber
 Shyp
 Grubhub
 Amazon
 Washio
 Lyft
 Homejoy
 Postmates
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Recent Trend—Some Platform Companies
Are Classifying Workers as Employees
 Reversing course


Honor—home care
3PD, Inc.—drivers
 Defending practice of classifying drivers as
independent contractors
 Amazon
 Lyft
 Uber
 Shutdown blamed on misclassification lawsuits

Homejoy—cleaning services
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Some Say Gig Economy Will Not Last
 Low-skilled gigs will be automated (i.e.,
performed by self-driving cars and drones)
 An Oxford study (2013) found that job positions
particularly vulnerable to automation include
telemarketers, tax preparers, watch repairers,
insurance underwriters, cargo and freight
agents, and mathematical technicians
 Potential liability related to misclassification
lawsuits may impact the future of platform
companies
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Others Say Gig Economy Will Grow
and New Solutions Are Needed
 Some call for a new worker designation other
than “employee” or “independent contractor”
 Some have proposed portable benefits that follow
a worker from job to job
 Some companies are providing contractors with
certain employee benefits (e.g., Microsoft
provides sick days and vacation time)
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Takeaways
 Technological advances and new business
models/industries are challenging:

Traditional insurance products

Traditional model of full time employee with
benefits

Tests for classification of workers

Adequacy of two categories for classification of
workers – employee and independent
contractor

Responsibility for non-employee benefits
© Copyright 2016 National Council on Compensation Insurance, Inc. All Rights Reserved.
Questions?
Lori Lovgren
Division Executive—State Relations
lori_lovgren@ncci.com
561-893-3337
© Copyright 2016 National Council on Compensation Insurance, Inc. All Rights Reserved.
References
Will Rinehart and Ben Gitis. 2015. “Independent Contractors and the
Emerging Gig Economy.” American Action Forum.
Freelancers Union and Elance-oDesk. 2015. “Freelancing in America: A
National Survey of the New Workforce.”
U.S. Government Accountability Office (GAO). 2015. “Contingent
Workforce: Size, Characteristics, Earnings, and Benefits.”
U.S. Government Accountability Office (GAO). 2009. “Improved
Coordination, Outreach, and Targeting Could Better Ensure Detection and
Prevention.”
Wage and Hour Division. 2015. “The Application of the Fair Labor
Standards Act’s “Suffer or Permit” Standard in the Identification of
Employees Who Are Misclassified as Independent Contractors.” U.S.
Department of Labor (US DOL).
Carl Benedikt Frey and Michael A. Osborne. 2013. “The Future Of
Employment: How Susceptible Are Jobs To Computerisation?”
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