The future of work: captives and the gig economy

I started my gig business, RAIN (Reinsurance and Insurance Network), in January 2011. The world was emerging from the 2008 financial crisis while, with three teens planning to go to college, I had a financial crisis of my own.

Having worked in the captive insurance industry for over 20 years, I knew a lot of people. RAIN’s entire business model leverages the ‘n’ for network to solve problems and create new opportunities.

My talent is networking, but there are many different kinds of talent, many of which will serve people well in the gig economy.

Have you heard of ethical hacking? Organisations such as Google, Goldman Sachs, and the US Department of Defense are paying hackers to identify vulnerabilities in their systems. Startups such as Bugcrowd, HackerOne and Synack work to connect ethical hackers with companies.

In 1991, Finnish hacker Linus Torvalds created his own version of the Unix operating system, Linux. He released the source code for free.

How about Fiverr? Fiverr is a platform that helps businesses and individuals with things such as logo design, voiceovers, presentations, or even fancying up articles like this one (no Fiverr for me, though—I used my free gig labour: kids in college).

If you’re still at home in quarantine, you may want to consider the Netflix documentary Somm. It tells the story of how people become professional sommeliers, aspiring to the Court of Master Sommeliers (CMS). This international organisation started in 1977. There are around 269 masters worldwide, each making $150,000 per year. They also probably get to drink some good wine.

The gig economy has also impacted bartending. Jackie Zyban, a former freelance bartender, now has a whiskey lover’s dream job: master bourbon taster for Brown Forman’s Old Forster Bourbon. Freelance bartending is an example of the contingent workforce (restaurants, retail, healthcare) of gig workers being on call.

I have a broker contact that writes professional liability for over 100,000 independent healthcare workers. Next time you are in a hospital or clinic, ask the nurses who they work for: they are probably gig workers.

There are even professional bridesmaids: one woman makes $1,000 per gig, for several hours of work. Golf ball divers, who collect stray golf balls, can earn $2,500 per dive at high-end courses; one pro claims to have earned $15 million fetching balls.

The need for talent

For those who do not see themselves in any of these roles, insurtech is another option. The successful insurtech companies understand that they need insurance talent—people who understand insurance who can help relate the tech to their target audience.

What does all this have to do with insurance, and captives for that matter? The global insurtech market was valued at $1.5 billion in 2018, with a compound annual growth rate of 40 percent expected over the next five years. Much of this money and the brainpower are focused on improving transaction processing and the functionality of insurance payment systems. That is a lot of smart people working on new opportunities.

A big issue in the gig economy is financial instability. Many of us can imagine, particularly during the COVID-19 outbreak, what the lack of a steady paycheque means. How about company-provided healthcare? These issues also impact home buying, sick leave, and emergency savings.

Gig workers do not receive regular paycheques. Why should they pay annual premiums? I am working with an insurtech to provide on-demand insurance for gig workers in the healthcare space. Rather than annual premiums, we are looking to develop an hourly rate for specific coverages: you pay when you work. The logic is that 20 cents an hour sounds a lot better to someone making $15 an hour than a $200 annual premium.

Gig workers are, typically, not employees. They have no workers’ compensation or other employee benefits, which are just two of the financial/insurance gaps gig workers face. Some see gaps, but others will see opportunity.

A multiple employer welfare arrangement (MEWA) allows a smaller company to offer employee benefits outside government-run health insurance exchanges by sharing risk. MEWAs are available for companies with as few as two employees.

MEWAs are state-specific: one in the state adjacent to mine insures more than 40,000 lives. I have been exploring the possible use of a captive to export a MEWA’s services to another state. I’m also working to find coverage for individual gig workers.

It is one thing to be sick. What if you have COVID-19? The self-employed face a stark choice: self-isolate or continue to work. About 25 percent of American workers—32 million people—do not have access to paid sick leave. According to the Economic Policy Institute, 18 states have laws barring local governments from enacting paid sick leave.

In the UK, the government has been accused of failing to grasp the threat of gig economy workers spreading COVID-19. Trade unions say two million workers with no sick pay may not be able to afford to self-isolate for two weeks if they develop symptoms. Governments in both countries are under pressure to promise statutory sick pay to all workers in their pandemic action plans.

The gig economy is not slowing down. In addition, many people now have a taste of what it is like to work from home. Some people will have developed a liking for this increased flexibility, and be grateful to be spared the endless meetings and commuter traffic.

Brit Global Specialty, in partnership with Google Cloud, has launched the first digital Lloyd’s syndicate, called Ki. Launched in May 2020,it will be accessible from anywhere at any time. My inbox is flooded with opportunities to explore pandemic business interruption exposures. Some see parametics and captives as the solution.

Today’s employers must learn how to adapt and manage multi-generational teams with differing values and expectations. Young people born into it are less likely to sacrifice flexibility for traditional employment. Gig workers also must adapt to the lack of protections available to them in a traditional workforce.

The captive insurance industry also needs to adapt to this new normal.

Greg Lang is the founder of Reinsurance and Insurance Network. He can be contacted at: glang@rainllc.com