After a global pandemic and a war in Europe that no one saw coming, maybe we should get out of the business of making predictions. But there’s still value in trying to pinpoint big trends. After all, it’s not about being spot on. It’s about helping industry players orient themselves, compete more effectively and better serve customers in an increasingly volatile global market. So, here are our seven key trends to look out for in the insurance industry in the year ahead:

1. Insurance products will be reimagined in the cloud 

In 2023, pressure on renewals, premiums, cycle times and customer retention will pose a significant challenge to carriers. Those that use cloud infrastructure to do more than just sign up customers and settle claims will succeed. While many have already made the move to cloud and invested heavily in digital transformation, insurance still lags behind other industries in terms of the imaginative use of advanced digital technologies to deliver the new products that customers want and the market needs.

That will begin to change this year. Some carriers will use cloud to make the typically opaque claims process more transparent and easier to understand for their customers. Others will use application programming interfaces and straight-through processing to reduce cycle times by improving the flow of data between parties. And innovative cloud-based products will push through based on demand. For example, in auto insurance, there will be greater refinement and sharpening of payment options such as per-mile or per-journey, supported by better use of telematics. The most imaginative insurers of 2023 will turn claims processes into shopping experiences to enhance customer experience and reduce cycle times.

2. The graying of the industry will prompt digital transformation 

Grow old or grow up? That’s the choice facing insurers in 2023. Talent in the industry has long been on the older side. As baby boomers retire, carriers are finding that up to a quarter of positions are unfilled in some functions. So, carriers will be looking to bring in third parties at scale. They’ll do this not to replace bodies and outsource day-to-day processes but to help codify institutional knowledge and build rules-based digital systems that deliver a more reliable and sustainable operational model over the long term. 

3. Analytics will offer quick ROI

Now that the basic operational transition to the cloud is complete for many insurers, competitive differentiation will come from accelerating its benefits; namely, speeding the process of insuring and improving customer and broker experience. Data will further increase in strategic importance in 2023. But don’t expect to see lots of multi-year, long-term investments in enterprise resource planning or customer relationship software. Rather, expect to see quick investments in digital and analytics solutions to achieve rapid returns on investment – such as predictive analytics that help insurers anticipate and triage customer need and application program interfaces for no-key, no-touch data ingestion. The coming year will see fewer deep transformation initiatives and more light-touch applications of digital and analytics for specific, immediately attainable goals. 

4. Embedded insurance will bring new opportunities

Value, not price, will be a key area of focus for both carriers and brokers. Instead of ratcheting premiums up, insurers will pair prudent underwriting with innovative product design that leverages more personalized data. They’ll deliver these products through partners and digitally enabled distribution channels. 

Embedded insurance — which allows any third-party, non-insurance brand to seamlessly integrate insurance products into its customer’s purchase journey — will create opportunities for carriers and insurtechs alike. In property and casualty and general insurance alone, the embedded insurance market is forecast to grow to $722 billion in gross written premiums by 2030, more than six times its current size and 25% of the total market size.

“Embedded insurance has opened access to new addressable market segments,” says Davide Palanza, research manager, IDC Financial Insights, “The size of this opportunity means the business model is giving birth to a new, vibrant ecosystem of insurance providers, embedded insurance enablers, and distribution partners. It will allow the industry to reframe its digital purpose individually and collectively, bringing benefits not only to insurers but also other organizations and customers with more relevant and affordable insurance.”

For example, this year will see auto insurance bundled at the point of vehicle sale and offered by original equipment manufacturers (OEMs) under the car brand -- with the risk underwritten by traditional carriers. Because of broader price pressures on OEMs (such as the microchip shortage), carriers will have to do more with less when delivering the services they provide as part of the underlying policy. One example? Claims Manager - a configurable servicing platform that uses computer vision and artificial intelligence to assess damage to vehicles during the claims process. 

See also: Cybersecurity Trends in 2023

5. Insurers and insurtechs will be friends, not foes

Insurance players will spend 2023 treading a path already well-worn by their banking counterparts. Over the last few years, fintechs have been playing nicely in the sandbox with banks as their partners rather than their competitors. A symbiosis of skillsets has been the key to their mutual success. This year, insurers and insurtechs will make the same move. 

Insurers will no longer bear the sunk cost of massive investments in technologies that can quickly become outdated. Instead, they will partner with insurtechs that offer focused and targeted solutions, which solve a specific piece of the puzzle within the insurance value chain. Already, insurtechs are becoming a huge investment opportunity for insurers. For example, in October 2022, insurance holding company Tokio Marine announced that it would invest $50 million in the series B funding of bolttech, a Singapore-based insurtech that seamlessly connects insurance providers, distributors and customers in the world’s largest technology-enabled insurance exchange. We expect to see more such tie-ups in the future.

According to Ryan Mascarenhas, group chief customer and operations officer at bolttech, “Creating tangible, lasting value for a customer often requires an insurer to form multiple partnerships with best-of-breed industry experts and embrace co-opetition. Traditionally, insurance carriers have wanted to manage the entire value chain themselves. So, embracing an ecosystem approach requires a big mindset shift. But it opens up so many additional possibilities, especially where the goal is to make the end customer experience as seamless as possible.” 

As the market slowly moves away from traditional channels, insurers will continually evaluate which insurtechs are the best fit for them and look for the right third parties to help orchestrate those solutions. 

6. Macroeconomic conditions will be a mixed bag for industry players

High inflation and high interest rates are hammering consumers and have tipped many global economies into the early stages of recession. But should insurers fear the dip? Overall, not necessarily. 

Certainly, carriers will feel pressure on profit in some areas. For example, because of continued supply chain disruption, competition for (and the price of) parts and materials remain high. For property and auto insurers, this is increasing servicing costs and cycle times. If these carriers decide to hold down premiums to encourage financially stretched customers to renew their policies, they may end up taking greater losses on those products. 

But those increased losses will be offset by high interest rates. Carriers make most, if not all, of their profit from investments -- especially in the bond market. So, high interest rates mean higher rates of return, which may cushion any drop-off in demand for policies and the increased cost of servicing them.

Shawn Homand, head of product at Liberty Mutual, sums up the tradeoff neatly: “With respect to property, we don’t expect any market softening in 2023 -- we expect continued hardening. There are capital constraints — caused by catastrophe losses, the current interest rate environment and inflation — which impact the supply side. But even with a reduction in the demand side due to a global recession, this will not tip the scale down in any meaningful way.” 

Homand also expects that “increased focus on analytical tools that provide better risk selection and accurate valuation analysis” will help keep internal costs down and premiums stable, too. 

Not everyone in the industry will benefit, though. Now that the initial pandemic terror has abated, life and annuity insurers may see a dip in simple life insurance policies. Insurance brokers, too, will have a tougher time convincing cash-strapped customers to renew discretionary policies. And those smaller carriers looking for a merger or growth acquisition may find themselves waiting for the cost of capital to fall before they act. Conversely, carriers with deeper pockets could decide that now’s the time to gobble up small fry. And, as always with a recession, expect policy fraud to increase. 

7. Insurers will need to get specific about ESG 

How to respond to the climate crisis has become a defining challenge for the insurance industry. Without insurance, most new fossil fuel projects cannot move forward, and existing ones must close. So, while not immediately urgent from a bottom-line perspective, forward-looking insurers will also spend time on climate change and other environmental, social and governance (ESG) priorities in 2023. 

Carriers continue to field questions from their boards and Wall Street on their commitment to a sustainable future. And industry analysts expect big changes by around 2027/8. According to Insure Our Future, an international campaign calling on insurance companies to exit fossil fuels in line with a pathway limiting global warming to 1.5°C, 13 insurers have committed to end or restrict underwriting for new oil or gas projects, 41 have done the same for coal and 22 for tar sands, as of October 2022. 

While this cleaner future may seem far away, in the short term, carriers need to seek more clarity and definition in their ESG strategies for products and markets. The complexity of the industry dictates that a long on-ramp is required to make the necessary changes. Insurers can expect investors to be asking questions and demanding more specific answers. 

Ultimately, 2023 will see a more competitive insurance market. While continued economic disruption makes prices and policy servicing tricky, high interest rates and the industry’s prior investment in cloud bodes well for those willing to be inventive and make quick investments in areas where better data can make a big difference. Bring it on.

2022 saw Hurricane Ian causing an estimated $80 billion in damages, California forest fires, employers wrestling with “back to workplace” policies, company issues stemming from the overturning of Roe v. Wade and numerous cyberattacks. This assortment of events has undoubtedly made insurance more desirable for buyers and insurers more nervous.

What areas are the main exposure points for organizations as we accelerate into the new year, and how can businesses act now to protect themselves? 

Employee Benefit Plan Sponsors Under a Legal Heat Lamp

Under the Employee Retirement Income Security Act of 1974 (ERISA), persons charged with decision-making responsibility are deemed “personally liable.” For the past decade or so, plaintiff lawyers have found that a careful investigation of fee arrangements between employers and outside contractors providing employee benefit plan services reveals little oversight of outsourcing fees. As one might expect, “excessive fee” cases have abounded in the U.S., and this won't slow down. 

Plan sponsors should address this exposure through fiduciary liability insurance to arm sponsors with legal defense and coverage for penalties, expert-led responses and necessary associated notifications.

The Cyber Exposure Saga Continues 

No discussion of exposures would be complete without paying attention to cyber-related exposures, especially ransomware. Clever computer hackers invade a network or computer system, then encrypt it, demanding ransom payment – almost always in cryptocurrency – before releasing it back to the owner/operators. SMBs are especially vulnerable and, worse yet, the consequences of an attack on a small business are catastrophic. It can lead to a tarnished reputation, customer dissatisfaction and, even worse, closures.

See also: 20 Issues to Watch in 2023

Businesses need to strategically rethink their current and often outdated operations and put the proper guardrails in place to help against cyberattacks. Cyber insurance is a security blanket businesses should implement. Insurance is generally available, although annual renewal pricing increases have been in the double digits in 2021 and 2022. Therefore, the quality of the insurance is important. Additionally, commercial insurance buyers must be wary of specific exclusions for cyber exposure on policies under which insurers did not specifically intend to provide the coverage. While this may not appear as a big issue on the surface, there is often insurance coverage found by the courts in the absence of policy exclusions.

Breach of Privacy-Related Allegations

When considering cyber-related incidents, one cannot forget allegations of breach of privacy. Increasing dependence on social media and “culture wars” make potential allegations much more possible and practical. For the knowledgeable insurance buyer, having solid insurance protection to defend against allegations of breach of privacy, as well as pay claim settlements, is increasingly important. Most cyber insurance policies specifically cover breach of privacy, but SMBs are less likely to understand the details of insurance purchased and may even be reluctant to accept the cyber exposure with proper concern. This is a major flaw as SMBs, generally, are targets for data breach efforts. Other traditional insurance products may also address breach of privacy allegations, so a good review of all insurance plans and associated details is a must to determine multiple sources of possible insurance coverage.

Retirement of “Baby Boomers” and Younger Workplace Leadership Can Stir the Pot 

With millennials moving up the ranks in leadership roles and Gen Z entering the workforce, businesses need to take into consideration all the employee protections instituted since the early 1990s around age discrimination and corresponding allegations to ensure they are not perceived to be favoring or overstepping workers' rights on a generational level. This will continue to be bothersome for employers from the standpoint of insurance claims. 

Additionally, with many employers still struggling to implement “return to the workplace” rules and employees trying to hold onto “remote working,” insurance claims are bound to unfold. This makes employment practices liability insurance all the more important as it is a powerful tool to cover businesses against claims by workers suggesting their rights as an employee have been breached – this includes failure to employ or promote and wrongful termination. 

General Increase in Crime Exposure

Last year, mega-retailer Walmart announced that it fell victim to a significant increase in criminal activity. As a likely result, this can lead to corresponding increases in retail costs to customers. A down economy can also cause increases in employee theft, although it may take some time to fully realize this exposure. In 2023, insurance company underwriters will likely want both pricing and deductible increases in many commercial crime insurance policies. NRF’s Retail Security Survey suggests that, on average, retailers saw a 27% increase in organized retail crime incidents in 2021. This number would be expected to rise, based on activity and experience in 2022.

See also: Risk Barometer for 2023

Insurance protection is important, and insurance policy details are critical.

Buffeted by accelerating technological change and feverish competition, mid-tier property-casualty insurers are entering a period of unprecedented challenges and opportunities.

The challenges come from giant insurers with far more resources and from small, feisty insurtechs whose speed and agility mid-tier insurers cannot match.

But opportunities for mid-tier insurers also come from rapidly developing technologies. Cloud, AI, APIs and microservices, among other innovations, are allowing them to develop new products and services with greater efficiency, speed and variety than ever before. And at lower cost.

As a result, new technologies aren't just allowing mid-sized insurers to better compete with bigger and smaller rivals. Technologies are forcing them to do so.

Here are challenges and opportunities in technology that will change the world of mid-tier property-casualty insurers in 2023 and the years to come:

Telematics. A key battleground for mid-sized insurers competing with larger and smaller rivals involves telematics - a technology that allows insurers to personalize their products based on each customer's driving habits. Data transmitted by sensors in an automobile give the insurer a far more refined and accurate sense of how much, where and how safely customers drive. Comparable products are becoming available for homes.

While telematic products permit some drivers to lower their premiums, more importantly for carriers, the technology allows the insurer to begin a two-way conversation with customers, helping them save money and avoid accidents. It is still early days for this technology, with only about 10% of consumers currently participating and over 50% saying that they are open to the idea of sharing their data to receive discounts. Potentially, this conversation could fundamentally alter the relationship of an insurance company with its customers, reducing traditional tensions and increasing customer loyalty.

Ecosystems. Carriers are recognizing that they can't rely on a single provider of technology solutions. The idea of using a single provider is becoming as outdated in the insurance industry as is the idea of consumers buying all of their software from Microsoft.

While the insurance industry has come to this realization slowly (in the banking industry, for instance, this is old news), it has profound implications for the way every insurance company uses technology. In the coming years, insurers will increasingly depend on ecosystems of providers, seamlessly connected by open APIs, that work well with each other. These ecosystems will help free companies from being locked in to one vendor and its products.

See also; Has the Remote-Work Trend Peaked?

Direct-to-consumer offerings. Demand for the direct-to-consumer experience has exploded since the onset of the pandemic. A recent study by the Boston Consulting Group found that 75% of potential insurance customers say they will only contract with a company that offers a simple, digital process for obtaining insurance products.

Spurred by new technologies and the COVID pandemic, many car insurance companies have dedicated websites and applications to reach potential customers. However, insurance agents remain an important part of the distribution channel for most mid-tier insurers because these products are often complicated and consumers like having a trusted expert's advice. Insurers must acknowledge that their products will be sold in a multi-channel environment and must invest in all of them.

Automation. Outdated P&C insurance technology infrastructure is the bane of many players in the industry. Legacy systems obstruct an insurer's growth and ability to regulate operational cost, business demands and customer requirements. And as the prospect of harder economic times grows, insurers will be looking with greater urgency to cut costs and increase efficiency.

With advanced analytics, robotic process automation and other emerging applications, insurers today have opportunities to streamline core operational processes such as sales and underwriting. What stands in the way for mid-tier insurers is that the costs of integrating major new systems appear prohibitive in terms of both time and dollars.

Creating products at a lower cost. As the insurance giants and insurtechs offer an ever-wider variety of technically savvy new products, some mid-sized insurers will turn to new technologies to allow them to compete without expensive and time-consuming system integrations.

One such technology is the Platform as a Service (PaaS), a cloud computing model that allows a third-party provider to deliver hardware and software tools to users over the internet. The PaaS provider hosts the hardware and software on its own infrastructure. This frees developers from having to install in-house hardware and software to develop or run a new application.

Take KOBA, an Australian insurtech MGA pioneering pay-per-kilometer personal auto insurance. It has migrated its insurance program onto Socotra, a third-party provider's policy core platform that allows it to scale and introduce products quickly and inexpensively without major system integrations. The platform provides cloud-native capabilities and the flexibility to plug in multiple raters, claims systems and a single platform to launch any insurance product for any geography or distribution channel.

KOBA's vision is to enable mid-sized carriers around the world to sell white-labeled versions of its innovative and tech-driven products, including boat, motorcycle and ride-sharing products, without having to spend the time, money and effort to create these products themselves.

The moment that matters for mid-tier insurers

For decades, large insurers had advantages over their mid-tier rivals due to the cost and complexity of new technologies. Today, we see a democratization of new technologies that can provide them with a competitive advantage. Combine this with their greater agility to introduce products and serve smaller niche markets, and a new environment emerges that gives these organizations a leg up. No doubt, the next few years will see an increasingly competitive insurance market.

That's the headline on a recent New York Times article: "My Watch Thinks I'm Dead." It seems that the Apple Watch's recent addition of a feature designed to detect low-speed car collisions and to send help if the wearer is incapacitated interprets lots of events as collisions and automatically dials 911. The problem is especially acute among skiers, who not only get bounced around on the slopes and frequently stop suddenly but may be wearing so much clothing that they don't hear the alarm from their watches in time to head off the emergency calls. 

The calls not only create obvious problems for emergency services, many of which report being overwhelmed, but point to a broader problem with false positives that I frequently see distorting thinking about innovation. 

There can be something a bit amusing about technological screwups. All that brain power behind this fancy technology, and they did what?

The Times article does have plenty of "huh?" moments. It also points, though, to even more serious issues with false positives. We often see something described as a breakthrough because it's 90% accurate at something — but that means it's 10% inaccurate. And many "breakthroughs" are more like 65% accurate. 

The issue with false positives is especially serious in healthcare, where they can lead to overdiagnosis and overtreatment that is not only expensive but can endanger patients. Al Lewis, co-founder and CEO of Quizzify, which offers employers programs that educate their employees on healthcare issues, calculates that testing an entire employee population to spot someone at near-term risk for a heart attack would cost at least $1,000 per employee — even if you make the highly optimistic assumption that the test would be 90% accurate. The reason is all the false positives. 

If you have 1,000 employees, your 90%-accurate test will likely find the one person at high risk of heart attack this year who wouldn't otherwise be found, but it will also flag some 99 other people and send them to their doctors for extensive testing and, for many, unnecessary treatment, perhaps including stents. Lewis figures the total cost of what wellness vendors may suggest as an inexpensive test to be at least $1 million for the whole, 1,000-employee population. (He goes into much more detail here about the expense and dangers of overtesting, because of all the false positives that result.) 

You see this error all the time in the enthusiasm that tech companies express for "agents" of all sorts. Remember the "internet refrigerator"? It would track the food you had inside and reorder as needed — but what about the false positives? What happens when your football player son, who drinks a gallon of whole milk a day, goes back to college in the fall? What are you supposed to do with those gallons that show up before you intervene? 

Those agents that were supposed to sort through all the news in the world and prepare a sort of newspaper for me each morning were a great idea — but only if they got everything right. What about all the material I didn't want, yet had to wade through? I remember when phones first started to have GPS; companies waxed poetic about the possibility of spotting me outside a Starbucks and being able to send me a coupon for a latte. What if I wasn't in the mood for one? Then, you're just pestering me.

While the insurance industry doesn't indulge in techno-phoria like the Silicon Valley types do, there can still be blind spots about false positives. I see lots of optimism about the accuracy of AI in spotting claims that are likely to head to expensive litigation or clients who are seriously contemplating leaving for another carrier. Lots of life insurers talk about the high accuracy they can achieve in estimating life expectancy based on just a few questions, Yet I don't see much consideration of what happens when the AI returns a false positive. 

In some cases, there's no particular downside. You do the best you can with the new technology and figure that whatever you don't spot in the way of, say, claims headed to litigation would have been missed anyway. Still, every innovation should be viewed with the idea that there may be unintended consequences — maybe that action you take when you worry that a claim may become litigious will set off someone who never considered hiring a lawyer. 

The need to watch for unintended consequences will increase as the industry continues to move toward what we're calling "predict and prevent" and away from the traditional "repair and replace" model of indemnifying people after a loss. If we're asking people to take actions, we have to be sure we aren't steering them into any danger. A colleague shared a story from his wife about how a telematics-based system was trying to turn her into a bad driver. We can't have that.

As I said, some failures of technology can be darkly amusing. I sometimes think back to a piece a colleague at the Wall Street Journal, the late, great Jeff Zaslow, wrote 20 years ago about the foibles of technology. He included an anecdote about the early versions of TiVo, which tracked what you recorded and then recorded other shows that its algorithms decided you might like. He quoted someone as saying, "My TiVo thinks I'm gay" (which the person mentioned to a TV writer friend, who turned the idea into an episode of "The King of Queens.") 

So, I hope you got a chuckle out of the Times piece and from Jeff's. Still, the problems that they chronicled in droll fashion can create serious issues if we aren't careful. I hope we're careful.

If false positives can trip up the legendary designers at Apple, they can surely ensnare the rest of us. 

Cheers,

Paul

In the heartland of America, far from the coastal regions traditionally associated with innovation and entrepreneurship, business is booming for financial service companies with bright ideas and the ambition to succeed.In Ohio, historically America’s cauldron of industry, only manufacturing contributes more than financial services to the economy in terms of percentage of GDP. The capital Columbus is #14 in the North America 2021 Findexable rankings for best-developed fintech ecosystems and 39th in the world, having made a steep climb of 70 places over 2020.

The growth of the state’s financial sector in the past decade is due in no small part to the efforts of a unique private economic development corporation, called JobsOhio, a state-authorised, not-for-profit that has lately been turning its attention to insurtech as a specific focus of opportunity. JobOhio’s insurance/insurtech initiatives are headed by Ron Rock, who has a strong background in financial services, spanning 20 years. Rock has been heavily involved in business development, giving him the credentials to lead innovation and investment programmes in the insurance sector.

“Banking and insurance are key contributors to our economy,” says Rock, “and Ohio ranks as the fifth largest economy in North America. We’re home to progressive financial brands such as Klarna, and we have nine large insurance companies in the state. Insurers are constantly thinking about business development, how to become more efficient, and how to reach customers in their preferred channels with new offerings. This is the driving force behind the insurtech initiative within JobsOhio.”

Ohio provides many advantages for startups and established businesses alike, says Rock. It has thriving metropolitan and commercial areas such as Cincinnati, Cleveland and Columbus, there is a favourable state regulatory environment, and the cost of living is far lower than in popular business locations such as New York City and San Francisco. There are also excellent inter- and intra-state transport links, venture capital is plentiful, and more than 200 colleges and universities nurture a growing talent pool for tech-driven companies.

Rock explains that JobsOhio has far more depth than the name implies. Although the Jobs prefix suggests an employment development agency, that’s only part of the story; it works to attract capital investment, encourage startups and strengthen established brands, which creates work opportunities. So, when companies choose Ohio, part of Rock’s role is make sure they access the strong local community of business partners, customers and talent that can help to grow a business and put it on the map. JobsOhio brings all the parts together and channels creative energy into successful collaborations.

“We have a diverse ecosystem that can cultivate and support the insurance sector,” says Rock, “and insurtechs are an important part of the mix. We work arm in arm with the state to encourage world-class corporations, entrepreneurs, and talented individuals to build their businesses and careers here.”
There’s certainly no shortage of financial help for them. Incentive programmes include economic development grants, growth funds, and research and development grants. There are the heavily-funded ‘Innovation Districts’ in Cincinnati, Cleveland and Columbus, to help generate ideas and develop the infrastructure to attract more companies.

And there is a JobsOhio Workforce Grant as well as its Talent Acquisition Services that offer customised sourcing, screening, and training solutions. As well as collaborating with regional economic development organisations, and federal authorities, creating structured programmes and investment initiatives to encourage and support insurtechs, JobsOhio has struck partnerships with universities and training organisations to ensure a highly skilled funnel of employees. The state turns out more than 35,000 college grads qualified to work in financial services every year.

“The region’s impressive technology talent ecosystem has proven to be vital for our expansion and was a core reason behind our decision to scale here,” says Alex Frommeyer, co-founder and CEO of Beam Benefits. “We love the people, the culture, the lifestyle.”

From an employee’s perspective, it’s good to know that Ohio’s composite cost of living index is significantly lower than the national and regional average; it ranked #1 for affordability in 2020 in the U.S.News Opportunity Rankings. It’s no wonder that companies stay loyal to it. Ilya Bodner, who founded Bold Penguin to build software for the small business insurance sector, got started in Columbus in 2016 and was anxious to stay close to its roots when it went looking for a buyer to fund its expansion.

When Bold Penguin was acquired by another mid-West firm with similar values – American Family Insurance Mutual Holding Co (AmFam), the country’s 13th largest P/C insurance group – in January 2021, he was delighted that it meant he could keep his local team together.The deal, which attracted a huge amount of attention in the insurtech space, meant he could ‘put a pin on the map’, as he described it, confirming Columbus as what he believes is ‘the mecca of insurance’ in the States.

Despite the economic impact of COVID-19 and the current recession, Ohio, says Rock, remains an attractive place to do business and he is optimistic about future growth. But with every company and new venture, he underlines the importance of getting the fundamentals right and offering something that the market truly needs. He cites the example of Root, a home-grown insurtech initiative.

“Root was a company on the way up,” he says. “Although it has a great telematics product, it’s not ground-breaking technology in the insurtech space. Many insurers have been doing telematics for a while. I could see what Root needed to address to become more viable and successful. It was very upside-down in terms of premiums written and the amount of reserves it had to hold and the amount of claims it paid out. So there is often a learning curve, and sometimes an insurtech needs to come down to earth, take stock, and make adjustments.”

In contrast, another home-grown company called Branch Financial, launched in 2017 and headquartered in Columbus, took a different approach to its business model. Branch uses data and technology to make home and auto insurance easier to buy and more cost-effective.

“I’ve had many conversations with Branch’s CEO, and I was interested in how he approaches the market,” says Rock. “Branch only wants to grow as fast as its loss ratio allows, which is very wise.”
Another success story is Beam Benefits, which, unlike Branch and Root, came from out of state. The digitally-native employee benefits company uses machine learning to give brokers and employers tailor-made quotes in seconds. It has raised more than $160million in funding and is now available in 44 US states. Both Beam and Root have benefited from support from Drive Capital – a Columbus-based VC fund that has amassed a $2billion war chest in assets under management, specifically to invest in technology companies outside of Silicon Valley.

Speaking in summer 2022, Drive’s co-founder Chris Olsen, formerly at Sequoia Capital, said he sought out promising founders in regions overlooked by other investors. He firmly believes that if venture capitalists widened their scope, the American economy would be more competitive internationally. JobsOhio certainly makes a virtue of the state’s entrepreneurial spirit – and how economical it is to do business there. “One of our campaigns is called ‘Ohio is for leaders’,” says Rock. “And If you’re travelling across North America, you might see us get a bit cheeky with our advertisements. For example, we compare the cost of doing business in New York versus Ohio; it’s cheaper to head west and run a business from here.”

According to Crunchbase data, venture capitalists injected more than $3billion into Columbus alone over the past 20 years, particularly into healthcare and insurance startups. While acknowledging that investment in the global insurtech market has taken a knock over the past 12 months, Rock believes you shouldn’t read too much into one year’s figures.

“We’re actually on course to do more venture capital investment in 2022 than we did in 2021,” he says. But there’s a lot of noise in the marketplace and it’s important to separate the wood from the trees when looking for viable ideas and investment potential. “I’m combing the landscape as a member of different investment committees”, he says. “When I look at what the VCs are investing in, they certainly have a lot of choices. If you’re reviewing 100 different companies, you might come across 20 that do the same thing, another 20 that do something in another vertical, and they all look similar.
Ohio’So you have to dig beneath the surface to make sure you pick a winner, something with a great business differentiator.” Many of the larger insurance companies Rock works with are setting up their own innovation departments and labs.

“We do a lot of different programmes with these companies. Although they’re trying to build from within, they also need external partnerships and guidance,” he says. A key area in which it can help is ensuring the right cultural fit between insurer and insurtech. While insurtechs may have the technology and the bright ideas, plus enthusiasm in abundance, they don’t always have an insurance mindset and can sometimes move too quickly for traditional insurers with a more cautious outlook.

“We’ve found that a poor cultural fit is one of the reasons why a company value falls,” says Rock. “If there is a disconnect between partners, it’s going to hit the numbers. You have to work hard to get the right focus and a shared vision.” One way to facilitate that is by promoting old-fashioned networking. “One of my ambitions is to create a large state-sponsored event under the JobsOhio banner,” says Rock. “Think of events like Insurtech Insights or InsurTech Connect. Because Ohio is a growing base for insurtech in America and is drawing interest from across the world, it’s a natural meeting place for the insurance community.”

This article was originally written and published by 'The Insurtech Magazine.'

Sponsored by ITL Partner: JobsOhio

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Top articles surrounding our January focus, Claims. Plus: an insightful interview with Snapsheet's Andy Cohen.

FROM THE EDITOR  The thought that keeps rattling around in my head as I think about underwriting these days is: How can you make accurate predictions about risk based on historical experience... when the world has decided to throw so much of that experience out the window? COVID-19 changed all sorts of assumptions about life expectancy, at least in the short run and perhaps in the long run; we just don't know yet. The pandemic also reset our patterns of work, changing the risks associated with buildings and with those who work in offices and factories -- or maybe not, as more companies insist on a return to the office.   Inflation came out of nowhere for the first time in decades and made just about every sort of claim more expensive, especially in auto, where supply chain issues sent car prices through the roof. Now, inflation is subsiding... we think... but how fast?  And don't get me started on the Russian invasion of Ukraine, a stunner that not only created tons of business risks but that greatly stepped up the general geopolitical uncertainty, including on the possibility that China will invade Taiwan. I wish I had an answer for underwriters. Instead, as usual, I have a story. It's one that was told to me in 2000 by Gary Loveman, a Harvard Business School professor who rather unexpectedly found himself being asked to be COO at Harrah's and who reinvented loyalty programs, initially for Harrah's and eventually for the whole gambling industry.  The analogy is far from perfect. Regulations will prevent insurers from implementing many of the ideas. That's why I used the word "dream" in the headline, rather than offering a concrete proposal. But there may be aspects of his ideas that can help with underwriting -- and it's a good story.... Loveman was a popular but untenured professor at HBS, doing some consulting on the side, when he met the CEO of Harrah's at a continuing education program that Harvard put on. Loveman later sent him an unsolicited letter with some ideas about how Harrah's could break out in what had become a commodity market, where every casino's games were basically the same as everyone else's. Next thing he knew, in 1998, the CEO had offered Loveman the job of COO. Loveman, who had never managed more than his admin and some research assistants, was going to be managing 15 casinos with more than 10,000 hotel rooms and more than 35,000 employees.   Among the many smart things he did, he reversed the sequence of the loyalty program. Rather than wait for customers to earn loyalty points, he used technology to guess what kind of customer someone would be based on the first interaction, or at most the first few, and started treating them as part of that tier. If he was wrong, he had only cost himself the occasional steak or free hotel room (that would have been unoccupied anyway). But if he was right -- and he was right a lot -- he had a good chance of winning the loyalty of someone before they wandered down the street to another casino.    I had personally seen the attraction of that sort of loyalty-on-the-come approach. When I left the Wall Street Journal to become a partner at a consulting firm, Diamond, a few years before, I was suddenly going to be traveling a ton and didn't want to have to wait a year for the airlines to start rewarding me. I wrote letters to the major airlines asking for status and promising that I'd spend a bunch of money with them if they agreed. American and United did, on the understanding that they'd check up on me after a few months, and I spent thousands of dollars a month with them for years.    So, that loyalty inversion idea stuck with me, and it would do a lot to improve underwriting -- if regulators would allow it. Imagine if you could shorten the duration of policies or make the premium variable, so that you weren't having to make a one-year prediction on all those fast-changing variables. Instead, you'd be issuing a one- or two-month policy for, say, an auto based on your best understanding on general inflation, on the prices of used cars, on general driving trends and even on the particular behavior of the insured, as measured by a telematics device.    You could handle far more uncertainty and surprises because you'd learn on the fly, as Loveman and Harrah's did, while minimizing the cost of your mistakes.    No, regulators won't allow the sort of flexibility that would be ideal for underwriters. Nor should they. Regulators need to protect consumers, and allowing for such variability in premiums would create the potential for all sorts of mischief by insurers, which could lure people with low initial offers and then quickly jack up rates. Regulators want to provide customers with as much certainty as possible about coverage and rates.   But I do think the notion of underwriting by prediction and experimentation is still a powerful idea and could point underwriting in some useful directions. Let's call it a dream.    Cheers, Paul   P.S. In any case, you might want to look at Loveman's story just for the sophistication of the data analysis. He learned, for instance, that while industry consensus was about courting the high rollers (the "whales"), Harrah's best customers were actually a group of decidedly low rollers who dropped in for an hour or two at a time, often to relax on their way home from work. He also demonstrated the power of what has come to be known as "omni-channel." Staff often recognized regular customers at their casino and provided special treatment but had no way to recognize good customers from a different Harrah's property -- until Loveman set up a program that captured and shared data from all the games, all the restaurants, all the bars, etc. from the group's 15 casinos, plus the dozens more they went on to acquire before Loveman stepped down in 2015.    If you're interested in learning more, you might check out this piece Loveman wrote for Harvard Business Review or this piece about him produced by Stanford Business School.  Ideally, underwriting is based on precise data about risk, gathered over years or even decades, but what happens when the world isn’t ideal? It certainly hasn’t been, as all sorts of anomalies have arisen: COVID, the Russian invasion of Ukraine, supply chain disruptions, inflation and more. To get a better handle on how insurers can underwrite risk in such an uncertain world, ITL talked this month with Henry Kowal, director, outbound product management, insurance solutions, at Arity, an Allstate subsidiary company that tackles underwriting uncertainty with data, data and more data about driving behavior gathered via telematics. Read the Full Interview "In terms of underwriting, we want to go beyond where most are now. Those using telematics have a customer drive for three to six months, then determine how good a driver the person is. We want insurers to have that data at the point of sale, not six months later."  —Henry Kowal Read the Full Interview READ MORE 3 Signs Your Underwriters Are in Trouble Fortunately, technology is maturing just in time to respond to common challenges, allowing underwriters to refocus their time on what they do best. Read More Why Underwriters Don’t Underwrite Much The average underwriter spends 40% of their time on administrative tasks, 30% on negotiation and sales support and only 30% on actual underwriting. Read More Dramatic Shift in Underwriting Ahead With the world changing, commercial underwriting is going to be called on to minimize the impact of complex risk on an ever-riskier world. Read More Empowering the Underwriter of the Future I asked an audience how long it takes a new underwriter to go from zero to productive: The majority voted for 24 to 36 months. This is a ludicrous proposition in the age of AI. Read More The Need for Transparency in Underwriting Open the black box and combine analytics with underwriter expertise to evaluate the computer’s conclusions and where the information comes from. Read More Simulator Gamifies Underwriter Training An “underwriter simulator” program of gamified learning and 3D interactive scenarios redefines what's possible for workforce training. Read More FEATURED THOUGHT LEADERS Chris Mullan Tim Crowe Michael Reilly Denise Garth Megan Bock Zarnoch Prakash Vasant Huw Newton-Hill

Ideally, underwriting is based on precise data about risk, gathered over years or even decades, but what happens when the world isn’t ideal? It certainly hasn’t been, as all sorts of anomalies have arisen: COVID, the Russian invasion of Ukraine, supply chain disruptions, inflation and more. To get a better handle on how insurers can underwrite risk in such an uncertain world, ITL talked this month with Henry Kowal, director, outbound product management, insurance solutions, at Arity, an Allstate subsidiary company that tackles underwriting uncertainty with data, data and more data about driving behavior gathered via telematics.

ITL:

Auto seems to be a space where there’s even more uncertainty these days than in others. What are gas prices going to be?  What's driver behavior going to be like?  Will people return to offices and commute like they did before? And so forth? How do you underwrite when things are changing so much?

Henry Kowal:

It's really challenging. A few years ago, I'd never really heard of chip shortages, or supply chain disruptions, at least when it came to auto insurance. Now, the issue is front and center.

But we have lots of data. We just celebrated a milestone this past November, where Arity surpassed 1 trillion miles of driving data. And that driving data is available across the U.S., across states and even down to the ZIP code level. What we see is that total miles driven has returned to where it was before the pandemic, but the risky driving behaviors that we saw during the pandemic -- specifically, driving at high speeds and distracted driving -- have persisted.

In terms of underwriting, we want to go beyond where most are now. Those using telematics have a customer drive for three to six months, then determine how good a driver the person is. We want insurers to have that data at the point of sale, not six months later.

ITL:

How do you gather the data so you know what kind of driver I am when I show up on the doorstep of, say Allstate, to buy insurance?

Kowal:

Only about 16% of Americans are currently in a telematics program, but over 80% of Americans have a smartphone through which they're already sharing their location data. They’re doing it with everyday consumer apps for finding good gasoline prices, checking the weather, etc. So, Arity has forged relationships with these mobile app publishers, who gain permission from users to monitor their driving behaviors. We power some of the features that consumers can benefit from, such as crash detection that could lead to the deployment of emergency services or roadside assistance. In exchange, consumers consent to share driving data with us.

We have over 45 million active connections across the U.S., and insurers can tap into the database. When John Smith is shopping for auto insurance, they’ll ping us to learn about his driving behavior and use the data to price the insurance.

ITL:

A decade ago, assessment of risk via telematics largely focused on speed and hard braking. Are there other behaviors you’re monitoring now, as well?

Kowal:

Those are core behaviors that are still highly predictive, but the technology has expanded. We can also monitor phone distraction as a predictor of risk. As you know, distracted driving is almost an epidemic in the U.S.

We're also looking at driving behaviors that are contextualized. By that, I mean it's not just about speeding – is this person driving over 80 mph? It’s, is this person speeding versus the posted speed limit?

We’re also looking at daily usage patterns. How frequently does somebody drive and for how long? What’s the driving environment? That's taking into account the types of roadways that an individual is driving on, which could even factor in dangerous intersections. Some roads and intersections are more dangerous than others.

ITL:

So, you’re not just looking at me as the driver. You're looking at where I'm driving and when I'm driving and layering those risks on top of my behavior.

What kind of pushback do you get on what you're measuring?

Kowal:

People might say, I was driving, but I wasn't the one using my phone, so I shouldn't be getting dinged for phone distraction. Or, I wasn't the driver. I was the passenger. If that’s the case, the user can easily update that in the app

Another issue is the Big Brother effect. People may say, I just don't want my insurance company tracking me.

But, more and more with smartphones, people see this as an exchange. Am I willing to provide my data in exchange for the potential to save on auto insurance? Because if you think about it, driving behavior is an actual measure of driving risk. It's not a proxy, like a credit score or your age or your education. We did a survey back in 2021, and the majority of folks said, “Yeah, I would rather be priced and assessed based on my driving behavior and my driving record, versus who I am and where I live.” So, I think that Big Brother concern is becoming more and more the minority.

ITL:

Do I have the opportunity to see what your driving data is, and do I get an opportunity to protest or correct it. I'm thinking of the credit bureaus, such as TransUnion, which these days have to let me know what my score is and protest items if I want to.

Kowal:

That’s a really good insight. Arity treats our ArityIQ product, which is pulled at point of underwriting, as a FCRA (Fair Credit Reporting Act) product.

 So, it's a consumer report, similar to  credit data, and Arity abides by FCRA rules, which include consumer disclosure. Individuals have the right to request their consumer disclosure which would include information that was shared with an insurer for quoting or underwriting purposes. They also have the option to dispute information if they believe it is inaccurate.

ITL:

Where do you go from here?

Kowal:

A big thing is to continue to grow our database of connections. We're at over 45 million active connections right now. That represents just under 20% of the U.S. population. We want driving behavior on the majority of the population. So, we need to continue to grow our connections with mobile app publishers, but at the same time also continue to add connected car data from OEMs [original equipment manufacturers].

The other thing is that, right now, our product is based on providing an insurer with a score. That insurer uses that score to determine whether the customer shopping for insurance should get a discount. Our next evolution is providing what we call back attributes, the actual driving behaviors that go into the score. Based on our interactions and market research, that approach really resonates with, I'll say, the top 10 auto insurance carriers. As you know, all of them have their own telematics program, and they all have their own secret sauce, so they want the ingredients, those driving attributes. They’ll take those ingredients and score them themselves.

ITL:

What’s next in terms of the analysis you’re trying to do?

Kowal:

We’re looking at other more predictive attributes. An example is what I'll call contextual braking. What were you doing when you hit the brakes hard? How fast were you traveling? Was it during the daytime or at night? Was it during a rush-hour period? Using more of these contextual attributes helps provide even more predictive lift in terms of risk assessment.

A recent article in Wired provides the best explanation I've ever seen for how the digitization of commerce can start off in the best of directions but gradually get perverted into an unholy mess. While digitization in insurance is still in the "best of directions" phase, it's worth understanding the full lifecycle of failure so we can learn from the mistakes of others and not have to make them all again ourselves.

I'll summarize the Wired piece -- it's quite long -- and then end on a happy note, drawing on a column in the New York Times that suggests how Barnes & Noble could be an exemplar for the digitization of insurance. After a near-death experience, the bookstore chain seems to have found the cherished Goldilocks combination of efficiency and humanity. Not too hot, not too cold, but juuuuust right. 

The Wired article coins a scatological term (one I won't repeat in a family-friendly newsletter) for the three stages that digital platforms -- like those now in their very early stages in insurance -- go through and neatly explains how they shift from great promise to near-uselessness:

"Here is how platforms die: First, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die."

The hope is that, after massive numbers of users have been attracted, the abuse won't feel quite so onerous that they take the time and effort to find an alternative. Likewise, the hope is that businesses, once huge numbers are drawn in by that huge customer base, won't feel quite so put-upon that they'll take the time and effort to invent an alternative way of going to market. 

The result isn't exactly what we were led to expect when Google promised to organize all the world's information, when Amazon promised to build a hyper-efficient "everything store" or when Facebook promised a warm and fuzzy community where we could connect with old friends and relatives. 

And, as the article argues, the progression only works for shareholders for a time. Eventually users and business customers get pushed too far. 

"Think of Amazon," the article says. "For many years, it operated at a loss, using its access to the capital markets to subsidize everything you bought. It sold goods below cost and shipped them below cost. It operated a clean and useful search. If you searched for a product, Amazon tried its damndest to put it at the top of the search results.

"This was a hell of a good deal for Amazon's customers. Lots of us piled in, and lots of brick-and-mortar retailers withered and died, making it hard to go elsewhere.... And Amazon sold us Prime, getting us to pre-pay for a year's worth of shipping. Prime customers start their shopping on Amazon, and 90 percent of the time, they don't search anywhere else....

"Sellers had to sell on Amazon. That's when Amazon started to harvest the surplus from its business customers and send it to Amazon's shareholders. Today, Marketplace sellers are handing more than 45 percent of the sale price to Amazon in junk fees....

"Searching Amazon doesn't produce a list of the products that most closely match your search, it brings up a list of products whose sellers have paid the most to be at the top of that search.... The first five screens of results for 'cat bed' are 50 percent ads."

In other words, an unholy mess.

The same thing happened at Facebook, which built a humongous audience, then sold us to businesses that gunked up our feeds with ads and promoted materials, then systematically ratcheted up the fees on those businesses. I, at least, find so little of value that I rarely check in any more. Google is so thoroughly milking the businesses that are advertising to its massive user base that the Department of Justice has filed an antitrust suit. Meanwhile, we users have to wade through promotions to get to what we want -- if we can even find it.

The Wired article argues that TikTok has now moved into the abuse-your-users phase, and I'd say that Twitter took a major step in that direction under new owner Elon Musk, when he decided to try to charge for blue check marks -- even though those people are the sorts of power users that draw most of us to Twitter.

Now, I'm not saying the "unholy mess" strategy for platforms isn't profitable. Alphabet/Google and Amazon both have market caps of more than $1 trillion, and Meta/Facebook is still valued at nearly $400 billion, even after a 60% plunge over the past year and a half. 

I'm reminded of a conversation I had in the early 1990s with Scott McNealy, at the time the CEO of Sun Microsystems. We were discussing IBM's PC business, which had the dominant market share but which couldn't figure out how to make any money. "Hurt me with that problem," McNealy said. And loads of executives would be delighted to be "hurt" with the problems facing the platform giants as they try to maximize profits while not alienating their user bases -- at least, not alienating them too much.

But, as I suggested up top, I think Barnes & Noble is a better long-term model for the insurance industry. Yes, platforms will be important in insurance as an efficient way of matching buyers and sellers -- and they'll be even better if we learn from the over-commercialization that the Wired article highlights and can avoid it. But this column in the New York Times about Barnes & Noble explains how it provides the sort of human touch that insurers need to provide as they offer advice and assurance to guide people through an often-daunting process, while still responding adequately to the pressure for low cost and efficiency that Amazon forced on it.

The author, Ezra Klein, writes: "That was the lure of Barnes & Noble for me. It wasn’t so much a place to buy books as a place to be among them, for as long as you wanted. Unlike [the cramped local Crown Books], Barnes & Noble had space to sit, and it seemed to want you to sit there. Unlike the library, it was open till 9, sometimes till 10. I hated school. I wasn’t invited to parties. I loved Barnes & Noble."

While "love" is a word not often heard among insurance customers, I think we can emphasize the human connection (while paddling as fast as we can to increase efficiency) and leave the "unholy mess" strategy to others.

Cheers,

Paul 

As gig work gains a stronger foothold in the U.S., it is seeping into several aspects of lifestyle and work culture. Those who have opted to work in the gig economy are experiencing a new relationship to their schedule, income, workplace or absence thereof, mindset and relationship to those who pay them. Many of these changes are determined by each individual’s need or desire for flexibility in how and where they choose to make their living. 

Accelerating the trend toward self-employment, the COVID landscape normalized work from home (WFH), something many gig workers didn’t need to adapt to, as they were already doing it. Now, in a post-COVID economic landscape, traditional employment models appear increasingly outdated and are edging toward a new norm, possibly helping accelerate the already sizeable transition toward gig economy work. 

As a life insurance company doing business in the U.S., we wanted to better understand America’s tectonic shift toward gig work. To that end, we conducted a study that provides a comprehensive assessment of today’s gig economy and what it means to work in it. Our research looks at data on both the pros and cons of this growing trend. By surveying a broad spectrum of gig workers, we developed a finely delineated view of where the gig economy is currently, which can then be used to determine how this model of working could evolve to become its best. Our study aims to understand the model’s flaws, gig workers’ motivations and whether gig work can become a sustainable and financially secure path in the long run.

Recently, we’ve seen that even as employers have been offering fewer and fewer benefits, including lower healthcare allotments and dwindling defined contribution retirement plans, salaried workers were already suffering from an erosion of the safety net that traditional salaried work is supposed to provide. We know from our own survey findings and existing research that gig workers enjoy even fewer standard benefits than those in “regular” jobs. Therefore, one immediate goal for gig workers would be to put in place a financial infrastructure that is at least equivalent to the admittedly depleted safety net that conventional work provides. But perhaps we can do even better, given the tendency of this group of workers to be self-reliant, creative and highly resourceful. 

Survey responses from our 1,000-plus subjects very much confirmed that gig work is here to stay, and in big numbers. Currently, 59 million Americans— 36% of the workforce—are classified as gig workers. This number is forecast to experience considerable growth over the next several years, with one estimate at 85.6 million by 2027. Perhaps due to a cultural value system that strongly encourages self-reliance and independence, gig work appears to be a particularly American phenomenon. By comparison, data shows that only 4.2 million people, or 6.2% of the U.K.’s population, are self-employed.  

See also: Embedded Insurance and the Gig Economy

The gig economy’s most vocal critics believe that the model is exploitative of workers—at best, a fallback for those unable to find more steady employment. However, our study found that Americans were not pushed into gig work out of necessity: the majority of participants made a conscious decision to become self-employed. For most of our respondents, gig work wasn’t a stop-gap measure while they searched for more traditional employment—69% of those surveyed saw themselves participating in the gig economy for the foreseeable future. Job satisfaction was also remarkably high, as only 9% of respondents voiced an immediate desire to take up, or return to, the traditional job market. 

While gig work has existed since the inception of work itself, it’s no coincidence that the pandemic has been a rocket launcher for the gig economy—economic downturns often spark creative and non-conventional ways of earning income, and this, combined with physical COVID lockdowns, created the perfect conditions for this model to flourish. Tina Brown, who coined the phrase “gig economy,” points to the Great Recession of 2008-2009 as a watershed moment. She notes that many white-collar workers resorted to “a bunch of free-floating projects, consultancies and part-time bits and pieces while they transacted in a digital marketplace.” Ironically, many of these uprooted workers look back on this period of volatility with nostalgia—they were, for the first time, able to take control of their schedules and their payment structures, in the process making more money than they would or could in a traditional employment setting. 

The modern incarnation of the gig economy has had its fair share of growing pains. However, our research findings show a model positioned for long-term success, a result of a necessary weeding out of unsustainable business models. Between 2014 and 2022, there were 432 venture capital-backed startups that went belly up. Just a sampling of notorious failed start-ups includes Homejoy, Tutorspree, Helloparking, Rivet & Sway and Dinnr, all of which fizzled out due to poor market research, customers using only an introductory promotional offer or better-funded competitors. These blunders served as fodder for skeptics of the gig economy, who claimed the use of buzzwords such as “flexibility” and “independence” were a deceitful attempt to rebrand exploitation. 

Our study dived deeper into the mindset of the respondents, aiming to pinpoint why gig workers chose this alternative mode of employment. The term “gig worker” is a broad term that encompasses Americans from every generation, location, ethnicity and income bracket. Not surprisingly, respondents’ motivations were diverse. While 19% of those surveyed chose gig work out of disdain for work in a corporate setting, 35% realized they could make more money this way—a figure that jumps to 54% when accounting only for those earning $100,000 or more annually. However, all seemed to find common ground in the notion of flexibility. A majority of modern American gig workers take pride in molding their work life to match their personal aspirations. Whether freelancers grind for every possible dollar or maximize time spent with their families, they do so by choice. 

Job satisfaction isn’t everything, of course, and our research sheds light on many of the issues plaguing today’s gig workers. Financial security ranks at the top of their list of concerns. While independent contractors might enjoy not having an employer to rigidly dictate their schedule, they also feel insecure not having an employer who provides them with benefits. We heard that 62% of respondents claimed not having health insurance provided for them was a key drawback, while 67% noted that a lack of health insurance was an area in which their freelancing experience could be improved.

While the lack of adequate healthcare coverage is a broadly systemic problem, the emergence of the gig economy as such a fundamental proportion of the working environment may itself indicate that change is coming. Legislators and gig workers themselves are already adapting to remedy the issue. The American Rescue Plan passed in 2021 resulted in the vast majority of gig workers (93%) now having subsidized health care plans. In one case, 37% of independent drivers on Stride, a benefits platform, were paying as little as $1 per month for medical coverage in March 2021, double the amount of workers thus covered a year earlier. Government is beginning to understand the nuances of the gig economy, and as a result, some gig workers are being treated with the same dignity and access to benefits as traditional employees. 

See also: Implications of Ruling on Gig Workers

Gig working platforms are also evolving to provide more comprehensive benefits to their workers, quelling the backlash while creating a more loyal workforce. Business ethics and profitability are increasingly entwined, and the more successful gig work organizations recognize the correlation. By giving freelancers increased benefits, workers have a higher opinion of their employers, leading to less turnover. 

The debate over gig work has become a sensationalized shouting match, drowning out the voices of real gig workers—hard-working Americans who want to be defined by results, rather than by hours clocked in. By examining the gig economy in a holistic way, we hope to solidify gig work as a cornerstone of the American economy—providing modern American workers with the independence, compensation and security they deserve.