21 April 2020Executive Appointments

The future of work: an adaptive workforce

The term “gig economy” was coined during the 2008 financial crisis. It originated with the rise of new forms of alternative work through the internet, and gained popularity out of necessity in the recession. It was a form of work for the under- or unemployed that was forced by difficult circumstances, with associated negative connotations.

“Captives will again be looked to for answers to our newest and toughest risk challenges.”

The future of work should not be something that happens to you. Rather, it should be something you create for your company or your career.

Freelance work continues to grow, and technology makes this easier. Many people, including me, find gigging preferable to traditional work. But it is important to understand what is driving this trend, and how companies can prepare themselves for the future of work.

What is driving the gig economy?

Many businesses find it hard to locate the human capital they need. Meanwhile, the workforce is increasingly globalised, as many jobs can be done almost anywhere. Employers are constantly looking to reduce costs, and often do so by eliminating benefits, workspace, and training.

Many people have personal reasons for wanting to gig. They may be able to make more money, or it may offer a better work-life balance. Sometimes they simply find the work more interesting.

The US Bureau of Labor and Statistics says 43 percent of Americans will gig in 2020, up from 35 percent in 2017. The old gig model comprised freelancers, writers, artists, and photographers, as well as some folks with a side hustle, such as contractors, plumbers, carpenters and auto mechanics, much like Uber and Lyft today.

The old model also included those pursuing a dream, such as a teacher wanting to become an author or playwright, or actors working in hospitality while waiting for their big break.

The new gig model does not involve being forced to take a job or to look for extra work to supplement your income. There is of course still some of that, but it increasingly empowers workers to select jobs, employers and coworkers. It is about increasing flexibility in terms of where you live, when you work and with whomever you choose—even if that means working alone.

The challenge will be skills-based: gig workers need to have the skills employers are looking for. The question is therefore establishing which skills need to be developed to maximise the chances of success in the gig economy.

Yuval Noah Harari’s book Sapiens, first published in 2011, compares the world in 1500 to the world today. If a person fell asleep in 1000 AD and woke up 500 years later, the world would probably look and feel very familiar. If one of Christopher Columbus’ sailors (who was probably a gig worker) took a similar 500-year nap, waking up to the alarm of a smart watch, the world would feel considerably less familiar.

Prior to the 16th century, no human had circumnavigated the globe. Magellan did it 1522, over three years, at a cost of the lives of most of the crew, including his own. Today, anyone with a middle-class income can circle the globe in about 48 hours.

Historians suggest we might be living in the largest economic transformation in recorded history. As an insurance professional, I am not sure we’re ready.

Coping with change

Every generation believes it lives with constant change. This generation has plenty of reason to be concerned about robots coming for their jobs. The 24-hour news cycle has led to a constant overload of news, much of which feeds the fear among pessimists of perpetual crisis.

Optimists insist that we are just anxious. Could it be that the perception of accelerated change is an illusion, exaggerated by the distorting filter of the internet? The farther you get from your Twitter feed, the clearer this becomes.

We have seen change before. After the Civil War, 80 percent of Americans worked on farms. By the end of World War 2, 80 years later, 60 percent of Americans lived in cities. This did not turn out to be so disruptive.

The gig economy presents challenges for insurers too. An independent workforce is exposed to a variety of risks that can sometimes transcend commercial and personal lines coverages. Historically, re/insurers have struggled to address changing exposures and to meet insureds’ needs.

Part of the problem is the lack of loss history, but insureds also want to pay premiums that reflect their actual exposure, not an insurer’s conservative estimate. They want manuscript coverages that were built to address a company’s unique business challenges, and policies that do not need to be re-underwritten each year, but can be tweaked quarterly or as required. Sound familiar?

Freddie Reiss is credited with forming the first captive, Steel Insurance Company, in 1953, with the term “captive” borrowed from the Ohio company’s captive mines, which sent ore to its mills. In fact however, Lufthansa, the German global aviation company, had formed a captive—Delvag—back in 1924. The move was Lufthansa’s response to the absence or unwillingness of commercial insurers to cover its important business risks. Delvag is still protecting Lufthansa today.

As much as the world is changing, it often stays the same. Captives will again be looked to for answers to our newest and toughest risk challenges.

A friend at Crum and Forster has the job title of gig economy officer. The UK is looking to provide sick leave for gig workers, allowing them to stay home if they become sick with COVID-19. For the first time, the US is offering unemployment protection for gig workers.

It remains to be seen what role captives will play in this new future of work.

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