The commercial insurance market is about to face one of its greatest challenges – the expansion of the open and gig economy – which will demand new approaches, according to GlobalData Financial Services.
The open economy is becoming increasingly prevalent across the global economy. Workers are no longer employed by a single company but are self-employed, giving them the capability to work for multiple organizations at any one time from a remote location, with the flexibility to work outside the usual 9–5 routine.
Estimates suggest that 40% of workers will be self-employed by 2020. This shift in employment practices will undoubtedly impact upon the insurance industry, as the commercial products currently on offer become – to a certain extent – obsolete.
This will create opportunities for new products to be developed, changing the commercial insurance landscape.
Improvements in technology are fundamental to the shift towards the open economy, allowing for providers such as Zego and Dinghy to develop flexible products that mirror the lifestyles of those working in the open economy. With devices becoming more connected and their capabilities improving, workers can be just as productive at a remote location than a standard office.
The reduction in the need for office space will ultimately impact the demand for commercial property insurance, as companies no longer require large premises or even a physical base.
However, despite there being a reduction in the uptake of some policies, others will undoubtedly see an increase.
Cyber insurance is one such product where uptake will rise dramatically. With individuals now having the capability to work remotely and potentially for a number of companies at a given time, there is a much greater need for data and hardware to be insured from potential cyber-attacks. Remote working also puts greater risk upon individuals’ laptop and mobile devices; with these being essential for work, any loss or damage to these items could be significantly detrimental to a self-employed worker.
As a result, gadget insurance will experience a greater level of demand. Providers such as InMyBag are already well placed should this occur, providing policyholders with quick claims handling to minimize the interruption impact of a damaged laptop, for example.
This is a product developed in response to the increasing wave of independent workers, offering a clear differentiating factor to improve policyholders’ peace of mind.
Although the impacts of the open economy on the insurance sector may be gradual, they will undoubtedly create a shift in the type of policies offered within commercial lines.