In this Spotlight feature, we speak to Harry Franks, CEO and Founder of digital insurance provider Zego, about why the insurance industry needs to do more to serve millennials and what Zego is doing to address the growing numbers of gig economy workers.
What is Zego? What made you set it up?
Zego is a digital provider of flexible insurance products for workers in the gig economy.
I set this business up after I saw first hand the way in which traditional insurance products and workers in flexible employment were clashing. Insurance products are designed for people working on a year by year basis, in one type of job. Insurance is thought about annually, systems are set up to provide products annually, but this isn’t the way we work anymore.
Gig work, by its very nature, is varied and short term. If short term workers are needing to buy mandated annual products then they are overpaying, being tied into one type of work, or indeed risking no insurance due to the costs. The result is the flexible economy isn’t flexible at all, unless you can have the support infrastructure around a part time worker and be as flexible as they are.
“Insurance is thought about annually, systems are set up to provide products annually, but this isn’t the way we work anymore.”
How well do you think the insurance industry is currently serving the millennial generation?
In a word – unsatisfactorily. There are many studies and statistics that show the modern workforce is changing to a more fractional working style. This is driven by choice, necessity and work availability and is facilitated by digital platforms that create specific job market places. It is driven by data. The result is that there are fewer large homogenous groups and more individuals. Traditional systems are not designed to manage this and therefore we find products that are not fit for purpose are the only option for millennials today.
Further to this, insurance is not a purchase that people like making. Usually we are filling in a range of forms and the experience is poor. For example, millennials want to have a good mobile experience and with 79% of web activity in 2018 said to be on mobile, new customer journeys need to be made available to match the type of customer.
What gaps/shortcomings in the industry’s provision for millennials does Zego hope to overcome?
At Zego we are focused on creating products that are consumer driven, not product driven. By that I mean we want to make sure products are fit for purpose and each worker has the right level of insurance cover for the work they are doing, at the time that they need it, and they don’t pay for cover if they don’t use it. For some, this is fractional, while for others, this makes more sense to be on an annual basis, but the risks are individual to that consumer. Secondly we think that the products should be simple to purchase, transparent and well supported. Buying insurance shouldn’t be a negative experience – it should be easy to manage through your mobile.
“Buying insurance shouldn’t be a negative experience – it should be easy to manage through your mobile.”
What are the unique needs a gig economy worker has when it comes to insurance?
In general, gig workers are independent subcontractors – they are not part of the PAYE structures you would benefit from as a full time employee as they work as and when they want or need to. This is the trade off, and is a contentious area of the gig economy. Being independent, gig workers need to provide for themselves in these areas, and insurance is one of these.
Take motor insurance – in order for a gig worker to participate on a fractional basis in commercial activity, i.e. using their vehicle as a tool of income by doing a delivery, then they have to have by law, a commercial insurance contract that takes into account this different type of use. These contracts are much more expensive, as by moving into this insurance space, you move into a new homogenous group of “commercial user.” Because there is no understanding of exactly what, and how much of each activity the worker is carrying out, the underwriter has to price the worker as the lowest common denominator. Whether you are driving doing deliveries for five or 100 hours in a week, your premium is the same, one size fits all approach.
In the gig economy, where we see a huge range in types of work, and amounts of each work type varying during the course of a year, a week or indeed a day, this approach means gig workers get tied into one type of work. The costs mean they have to work more than they might want to, just to offset the high premiums. Insurance then moves from what it was originally created for, to allow people to take some risk, to a barrier to entry into this new evolving area of the economy.
To me, this is an area that is often overlooked. How many of us have had to go through this process? The result is a hidden mechanism of control and I feel passionately that we can reduce via technology.
“Gig workers often get tied into one type of work and they have to work more than they might want to, just to offset the high premiums. Insurance then moves from what it was originally created for, to allow people to take some risk, to a barrier to entry into this new evolving area of the economy.”
If you could give millennials just one piece of advice about personal finance, what would it be?
Millennials working in the gig economy have a wealth of opportunities to work as freely as they wish, and to try a range of industries and work types. However, they must not forget that by engaging in this type of work, they need to protect themselves. After all, this is fundamentally a marketplace, so if things go wrong and you are unprotected, it can have significant ramifications. Make sure you think carefully about the insurance you buy for that unforeseen event.