Safety net
Although the expenses-based trend has been driven by the friendly societies, mainstream insurers are also launching products for this market. For instance, Aviva launched its Living Costs Protection last October, allowing policyholders to take out between £500 and £1,500 of cover a month, with the claim payment period limited to 12 months. Julie Higman, income protection product manager at the company, explains: “It is designed to help people who might have trouble evidencing their income. All they need to be able to show is that they work, on average, at least 16 hours a week.”
While more and more products are emerging that meet the needs of gig workers, this group also needs to be aware of the interplay between income protection and state benefits. Mr Smart says under the current rules, any benefit a person receives is reduced on a pound-for-pound basis if they are in receipt of a payment under their income protection policy.
For those taking out a modest level of income protection, the unfortunate consequence of this is that they can end up no better off than if they had not taken out the cover.
He adds: “It is wrong that the government penalises people who are looking after themselves. If someone is left no better off as a result of this, they might question why they took out cover in the first place.”
Reaching the gig economy
Given the complexities around protecting gig workers’ income, there is clearly a need for protection advice in this market, particularly in the context of a lack of workplace benefits. But products such as income protection are not well known among such groups, meaning reaching these individuals is a challenge.
Campaigns such as 7 Families are helping to raise public awareness of the financial implications of long-term illness or disability, but take-up of individual income protection remains low.
Figures from Swiss Re’s Term & Health Watch 2017 show that, although sales of income protection increased by 9.8 per cent in 2016, with just under 118,000 new policies sold, this is just a fraction of the sales seen in other areas such as critical illness insurance (434,000 policies) and term assurance (1.3m policies).
Mr Smart says a promotion piece is required to boost sales further. “The insurance industry needs to reach out to the gig economy, using advertising and advertorials to educate workers about the need for income protection,” he states.
“Partnering with the platforms they use to source work would be a good way to reach them.”
