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As sharing industries grow, the insurance industry must grow alongside them
By Ryan Benharris, Esq.
The Sharing Economy’s Impact on Workers’ Compensation was front and center on the second day of the 32nd WCRI Annual Issues & Research Conference as Dr. Robert Hartwig, President of the Insurance Information Institute, presented on how online corporations such as Uber and Airbnb are drastically changing the face of the economic workforce.
Hartwig’s research focused solely on the “transformation of the American workforce,” which finds more and more American workers flocking to companies such as Uber to bridge the gap between temporary and full time employment. Hartwig cited the meteoric rise of the smartphone and other mobile technologies that allow anyone to access services to discover a new source of income.
“Technology is transforming how resources are allocated in the economy,” Hartwig explained. “Labor is no exception to it.”
According to Hartwig, the insurance industry has two vastly different schools of thought pertaining to how the shared economy will affect the future of the American workforce. The first is an optimistic outlook that shared services will free individuals from the bonds of centralized hierarchal institution. The second is a pessimistic outlook that the companies are software driving marketplaces that are platforms and not employers.
In the optimistic outlook, Hartwig said that workers with more flexible lives and schedules will ultimately benefit. Unemployed individuals and underemployed individuals have the most to gain as there are fewer loopholes to jump through in order to procure employment.
In the more pessimistic outlook, Hartwig said that shared economy professions tend to reduce jobs to temporary “gigs” and to attract low skill workers who will ultimately be treated by the corporations as independent contractors. Allowing the workforce to change to this kind of economy tends to lead to employees who are willing to compromise job security, full time benefits such as sick pay, maternity leave and health insurance, and basically eliminates any incentive for overtime pay.
“This is creating a trend toward growth of temporary workers in the United States,” Hartwig said. “It substantially outperforms growth and overall employment.”
Hartwig said that temporary workers of shared industries have been a hot topic on the Presidential campaign trail over the last years; generating the slang term, “Gig economy.” Proponents of the gig economy will often tout its flexibility for otherwise unemployed individuals, as these jobs may allow them to complement their family and school obligations more than jobs with traditional hours. Opponents of the gig economy tend to focus on questions it creates regarding workplace protection and employees having less access to benefits or a reliable source of fluid income.
As the political scene debates the pros and cons of the shared economy, so does the average American. Hartwig’s research broke down who the American shared economy worker tends to be. According to his research, 44% of Americans have either been a user or an offeror of a shared service, combined. 42% of Americans admit to being users of shared services, while 22% of Americans have been offerors of shared services. . Ride sharing services such as Uber and Lyft account for the highest percentage of services used and offered. Hartwig also indicated that the vast majority of shared economy workers are young males, and 55% of the workers are members of racial or ethnic minorities.
When asked about their opinions of how they feel about shared economy services, Hartwig said that many offerors of shared economy services, when polled, are more likely to believe that they are participating in an industry that tends to exploit regulation. Users of shared economy services tend to agree, but to a lesser extent.
Where the shared economy and workers’ compensation collide is questions of coverage; specifically, whether or not a company like Uber needs to provide workers’ compensation to a driver if he is, in fact, considered an employee. Hartwig indicated that most auto insurance policies will include specific exclusions for the insured if they are using the motor vehicle as a taxi service. Similarly, a homeowners insurance policy will general include specific exclusions for persons using their home as an AirB&B. Hartwig cited a recent California ruling that Uber drivers are, in fact, employees of Uber for the purposes of whether or not they are covered under the state workers’ compensation statute. Hartwig said that he expects to see more claims (and questions) evolving from this particular issue.
One issue in particular that has already arisen is the question of whether an Uber driver must be classified as an employee for the sake of workers’ compensation coverage. In states such as California and Alaska, Uber has been under strict scrutiny for how it classifies its drivers. Hartwig said that although he is unaware of any state that has indicated that if you engage in the shared economy business, you must provide workers’ compensation, it did not seem out of the realm of possibility in the future.
In 2015, Uber agreed to refund the Alaska Department of Labor and Workforce Development Workers’ Compensation division more than $77,000 for misclassifying its drivers as independent contractors. The money paid was to reimburse the Department’s Uninsured Trust Fund. At the same time as the payment, Uber signed a petition agreeing to cease operations in Alaska until it complied with the state’s workers’ compensation laws.
As the issues arise, so do the ethical questions. Hartwig said that often times shared industry employees themselves will fail to even realize they do not have workers’ compensation coverage. “My sense is that the average person who offers their services through these things often does not know that they’re not covered for workers’ compensation,” Hartwig said. “Often that’s because they have chosen not to be covered or they don’t even know how to get coverage.”
Hartwig indicated that as sharing industries grow, the insurance industry is growing with them. “Just about everywhere where ride sharing legislation has been approved, the insurance industry has been behind creating products where issues can be addressed,” he said.
Some products Hartwig identified include wearable sensors that can monitor location, heart rate, and temperature; products designed to prevent workplace accidents before they happen. Smart fabrics and ingestible devices are already being introduced into the marketplace. These technologies will likely give employers and insurers access to information that very well could lead to an increase in employee safety protocol and better productivity.
Hartwig said that within several decades it is not unforeseeable that major industries will be completely eradicated and replaced with automotive replacements. With automobile manufacturers working to create driverless cars, he said that it would not be long until we had driverless taxi services.
Hartwig took questions from the audience. Many of them were geared toward the notion that as the science industry continues to create innovation, the insurance industry must also fight to keep up with it. One person even questioned if everyone in the room may someday become futile if some product or online service could be created to replace him.
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