Insuring freelancers in times of crisis

When dis­as­ter strikes, who pro­tects the unpro­tect­ed? Three years ago, LV= cal­cu­lat­ed that just 4 per cent of self-employed work­ers in the UK had income pro­tec­tion cov­er. The insur­ance firm warned, with eerie pre­science, of a “height­ened risk of a finan­cial cri­sis”.

At a con­ser­v­a­tive esti­mate, more than four mil­lion mem­bers of the UK’s self-employed work­force did not have rel­e­vant insur­ance when the coro­n­avirus pan­dem­ic began to suf­fo­cate the econ­o­my. And now that they are feel­ing the squeeze, hav­ing com­plained about inad­e­quate finan­cial sup­port from the gov­ern­ment, many are so cash strapped, it is hard to jus­ti­fy pay­ing insur­ance pre­mi­ums.

The plight of Dani, a Pre­ston-based free­lance light­ing tech­ni­cian, is all too typ­i­cal. On March 17, a day after prime min­is­ter Boris John­son announced lock­down plans, she was due to begin her dream job. “Lit­er­al­ly ten min­utes after that announce­ment, the email came through from the the­atre explain­ing ‘we can’t con­tin­ue’,” she says.

The 31 year old has fall­en through every finan­cial crack and only receives Jobseeker’s Allowance. But at £73 a week, it doesn’t cov­er her bills. With Dani’s part­ner being made redun­dant, the out­look is bleak. “I don’t even feel like we’re sur­viv­ing,” she says.

Self-employed musi­cian, com­pos­er and sound engi­neer David, who lives in Perth, Scot­land, qual­i­fied for the government’s COVID-19 Self-Employ­ment Income Sup­port Scheme, but he too is strug­gling to cope finan­cial­ly.

David and his wife, a care work­er, haven’t bought any­thing non-essen­tial since March and, to reduce petrol costs, their car has remained sta­tion­ary. Despite tight­en­ing their belts, this has not been enough to pre­vent hav­ing to dip into their sav­ings to pay the bills.  

“The events indus­try fold­ed overnight,” says David. “That’s my entire income gone. What am I going to do? Have I got any trans­fer­able skills?”

It is a par­tic­u­lar­ly chal­leng­ing time for those in the live events indus­try, which depends on self-employed work­ers with niche skills. Conal Dodds, who co-found­ed Bris­tol-head­quar­tered Crosstown Con­certs in 2016 and had staged more than 300 music events with­in 18 months, has already writ­ten off next year.

The events indus­try fold­ed overnight. That’s my entire income gone. What am I going to do? Have I got any trans­fer­able skills?

“This sit­u­a­tion has high­light­ed that the self-employed, free­lancers, zero-hours con­tract work­ers have no safe­ty net,” he says. “We need to recog­nise the impor­tance of these work­ers and look to pro­tect them in the future.”

Deepening the finance crisis for the self-employed

Those self-employed work­ers whose indus­tries are still open for busi­ness feel pres­sure to keep work­ing regard­less, accord­ing to Nes­ta research. Some 22 per cent of self-employed, 29 per cent of sole traders and 30 per cent of gig work­ers agree that if they caught COVID-19 and had to self-iso­late, they fear they’d lose their job.

In mid-Octo­ber, the Office for Nation­al Sta­tis­tics showed the UK’s self-employed work­force had shrunk to 4.56 mil­lion, and fall­en by 240,000 in the third quar­ter com­pared to the same peri­od in 2019.

Derek Cribb, chief exec­u­tive of the Asso­ci­a­tion of Inde­pen­dent Pro­fes­sion­als and the Self-Employed, laments the record drop to 2015 lev­els. Before the COVID-19 out­break, the UK had expe­ri­enced a con­sis­tent trend towards high­er self-employ­ment. “At the start of this year, there were over five mil­lion self-employed peo­ple in the UK, up from 3.2 mil­lion in 2000, rep­re­sent­ing 15.3 per cent of all employ­ment,” says Cribb.

He argues the new fig­ures are evi­dence of the “dev­as­tat­ing impact of the gaps in gov­ern­ment sup­port for the self-employed dur­ing the first wave of the pan­dem­ic” and reflect the crit­i­cal need for bet­ter solu­tions. “In times of reces­sion, the self-employed are key to dri­ving recov­ery,” says Cribb, “but the sec­tor is now strug­gling to save itself, let alone the econ­o­my.”

Mike Parkes, tech­ni­cal direc­tor at GoSim­ple­Tax, wor­ries that the finan­cial pres­sures fac­ing self-employed work­ers will soon ratch­et up. He pre­dicts a “dou­ble bub­ble” in Jan­u­ary, as his organisation’s research sug­gests 56 per cent of peo­ple opt­ed to defer pay­ment to HM Rev­enue & Cus­toms. Many self-employed work­ers will have to set­tle tax lia­bil­i­ties for the 2019–20 tax year and the first pay­ment on account due for 2020–21.

“Unless you have your house in order by Jan­u­ary 31, and suf­fi­cient funds to cov­er all tax lia­bil­i­ties, a defer­ral could cre­ate a per­fect storm,” says Parkes. “What’s more, once that date pass­es, HMRC will not hes­i­tate to reim­pose the inter­est charges, penal­ties and col­lec­tion pro­ce­dures usu­al­ly in place.”

Bleak outlook for the hardest hit

Can insurtechs or tra­di­tion­al insur­ers come to the res­cue? Andy Chap­man, chief exec­u­tive of insur­ance provider The Exeter, acknowl­edges “the self-employed are among those hard­est hit” by COVID-19 fall­out. “Despite the perks and flex­i­bil­i­ty of self-employ­ment, the real­i­ty is they are not pro­tect­ed in ways their full-time coun­ter­parts are,” he says.

The Exeter’s research indi­cates that work­ers in this sec­tor have a stark lack of sav­ings. Almost a fifth (17 per cent) have no per­son­al sav­ings to fall back on and 35 per cent don’t save any­thing in a typ­i­cal month. Chap­man reports The Exeter’s Day 1 cov­er, per­mit­ting pol­i­cy­hold­ers to claim after just three days off work due to ill­ness or injury, has proven pop­u­lar, with more than 5,000 appli­ca­tions dur­ing lock­down. 

Is technology the answer to freelancer insurance?

Now is the time for insur­ers and gov­ern­ments alike to embrace tech-dri­ven solu­tions, urges Fred­dy Mac­na­ma­ra, founder and chief exec­u­tive of flex­i­ble car insur­ance provider Cuv­va. The insur­ance indus­try “must mod­ernise its process­es and prod­ucts to bet­ter sup­port mil­lions of people’s chang­ing needs” and adapt for the on-demand gen­er­a­tion, he says.

“More afford­able and fair insur­ance prod­ucts and ser­vices to pro­tect the self-employed com­mu­ni­ty, bol­ster­ing the right lev­el of sup­port, will encour­age growth in the sec­tor, which is crit­i­cal in the eco­nom­ic down­turn,” says Mac­na­ma­ra, point­ing out that Cuv­va pro­vides car insur­ance by the hour, week or month. “It’s not sur­pris­ing that insur­ance providers offer­ing flex­i­bil­i­ty and a bet­ter prod­uct mar­ket fit are thriv­ing.” 

Chris Kaye, co-founder and chief exec­u­tive of Sher­pa, an insurtech organ­i­sa­tion offer­ing per­son­al risk man­age­ment, agrees. “Drew­ber­ry has a nice angle focused on free­lancers as a more tra­di­tion­al bro­ker and Dinghy has picked up on the need for flex­i­bil­i­ty in cov­er that is impor­tant to free­lancers,” he says. “I also real­ly like what Zego has done, embed­ding insur­ance into the gig-econ­o­my plat­forms to make it a seam­less part of the work­er expe­ri­ence.”

Col­lec­tive Ben­e­fits, a Lon­don-based insurtech start­up, is sim­i­lar­ly work­ing with lead­ing gig-econ­o­my plat­forms. “Pro­vid­ing ben­e­fits and pro­tec­tions for work­ers is a win-win,” says Antho­ny Beilin, co-founder and chief exec­u­tive, who reveals the com­pa­nies his organ­i­sa­tion works with have seen a 17-fold increase in engage­ment.

With the gov­ern­ment unable, or unwill­ing, to offer greater sup­port for self-employed work­ers, the onus is on organ­i­sa­tions and those with­in the insur­ance indus­try to col­lab­o­rate and pro­vide a life­line. Oth­er­wise, mil­lions will sink.

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