Why advisers shouldn't ignore the UK's gig economy

Why advisers shouldn't ignore the UK's gig economy

Gig economy workers make up a growing part of the UK’s workforce. But as they do not have the safety net of an employer’s benefits package, there is a pressing need for the individuals concerned to take out protection.

In the absence of this protection, a gig worker would have to rely on state benefits should they find themselves unable to work due to long-term sickness or disability. Although the amount paid under Universal Credit will depend on an individual’s circumstances, including age and whether they have any children, the standard amount for a single person aged 25 plus is £317.82 a month. For a couple, where both are aged over 25, they would receive £395.20 a month.

Professional protection

Additional payments will be made where there are children, housing costs and any disabilities or health conditions. However, Ian Smart, product architect at Royal London, says it can leave people with a serious income shortfall. “Universal Credit is not designed to provide claimants with a comfortable lifestyle,” he says. 

“Although most people think of the gig economy as Uber drivers and Deliveroo delivery riders, who would not typically make up a financial adviser’s customer base, a large proportion of it is actually made up professionals and skilled manual workers. We need to get the protection message out to these individuals.” 

A recent report, ‘Good gigs: A fairer future for the UK’s gig economy’, by The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), highlights this misconception. It found that just 16 per cent of gig workers were providing driving and delivery services. Instead, the bulk of this economy is made up of individuals providing professional, creative or administrative services (59 per cent) and those offering skilled manual or personal services (33 per cent).

Helping these individuals to protect themselves and their families is essential. While taking out life insurance and critical illness insurance should present few problems, gig workers can run into problems with income protection as a result of their variable income patterns. 

Cover complications

As well as requiring proof of income at point of sale, traditional income protection plans also insist on policyholders providing evidence of their earnings in the event of a claim. 

Stephen Crosbie, protection director at Aegon, says: “Fluctuating income streams can cause problems, but we also find that a lot of people in the gig economy will set up companies to make their earnings more tax-efficient. This reduces their income, making it difficult to get as much cover as they need.”

With a growing number of individuals like this not fitting the traditional product mould, insurers have explored ways to make income protection more relevant to them. For some, this has meant introducing a minimum benefit guarantee. For instance, Royal London guarantees that policyholders will not receive less than £1,500 a month if they have taken out more cover.

Another insurer solution is an income protection product that covers an individual’s expenses, rather than a proportion of their income. An example of this is British Friendly’s Breathing Space plan. This allows the policyholder to take out up to £250 of weekly benefit without any financial underwriting. They can also choose between claim periods of one, two and five years.