By David Doe FIERGBOR
Introduction
The financial and insurance landscape is undergoing a major shift, driven by the rapid adoption of technology and the emergence of new economic models.
At the forefront of this transformation is Insurtech, which encapsulates the fusion of insurance and technology. Insurtech is revolutionising traditional insurance models by leveraging cutting-edge technologies such as artificial intelligence (AI), blockchain and data analytics to create more efficient, personalised and accessible insurance solutions.
As the insurance industry grapples with the challenges of digital transformation, Insurtech is emerging as a critical enabler of innovation, offering new ways to assess risk, underwrite policies and process claims.
Parallel to the rise of Insurtech is the explosive growth of the gig economy, a labour market characterised by short-term contracts, freelance work and independent contracting. The gig economy has expanded rapidly across industries, from ride-hailing and food delivery to freelancing and remote work.
According to a report by Mastercard, the global gig economy is projected to grow to US$455billion by 2023, driven by the increasing demand for flexible work arrangements and the proliferation of digital platforms that connect workers with opportunities. However, the gig economy also presents unique challenges, particularly in terms of job security, financial stability and access to benefits such as health insurance and retirement plans.
Drawing from market trends, regulatory challenges and emerging business models, this paper assesses whether the gig economy represents the next big opportunity for Insurtechs. Furthermore, it provides strategic insights for insurers, policy-makers and gig platforms, offering recommendations for how to navigate this evolving landscape.
The Insurtech drive
Insurtech, a hybrid of ‘insurance’ and ‘technology’, refers to the use of technology to disrupt and enhance the traditional insurance industry. The Insurtech movement is driven by the recognition that the insurance sector, historically characterised by cumbersome processes and outdated systems, is ripe for innovation.
Significant innovations include AI-driven underwriting, which uses algorithms and data analytics to assess risk more accurately and efficiently than traditional methods. For example, companies like Lemonade in the US and ZhongAn in China use AI to process claims in a matter of seconds, offering a seamless customer experience that contrasts sharply with the lengthy and often frustrating claims processes of traditional insurers.
Similarly, blockchain technology is being used to enhance transparency and security in insurance transactions, enabling smart contracts that automatically execute when predefined conditions are met.
Another key innovation is usage-based insurance (UBI), which tailors premiums to individual behaviour rather than relying on broad demographic categories.
For instance, American auto insurers like Metromile and Root use telematics to track driving behaviour, offering lower premiums to safe drivers. Embedded insurance, which integrates insurance products into the purchase of goods and services, is also gaining traction; hence, the success of these companies is evident in their rapid growth and market penetration with more personalised, flexible and affordable products.
The gig economy: A rising force
The gig economy, often referred to as the “on-demand” or “sharing” economy, is a labour market characterised by the prevalence of short-term contracts and freelance work as opposed to permanent jobs.
This economic model has gained significant traction globally, including in Africa and Ghana, driven by technological advancements, changing consumer preferences and the desire for greater work flexibility. Gig workers, who include ride-hailing drivers, food delivery couriers, freelance writers and remote consultants, now represent a substantial and growing segment of the global workforce.
In Ghana, the gig economy is emerging as a critical component of the labour market, offering both opportunities and challenges.
Global and African context of the gig economy
Globally, the gig economy is expanding at an unprecedented rate and it was estimated to account for 43 percent of the U.S. workforce in 2023 as reported by Intuit, highlighting the scale of this shift in labour markets.
Moreover, it has been projected to account for nearly half of the workforce by mid-2025, according to Velocity Global. Similarly, platforms like Uber, Lyft, DoorDash and Fiverr facilitate millions of transactions daily, underscoring the economic significance of gig work. The McKinsey Global Institute estimates that up to 162 million people in Europe and the United States engage in some form of independent work, contributing significantly to GDP.
In Africa, the gig economy is also growing rapidly, with the continent’s youthful population and increasing Internet penetration fuelling its expansion. A 2023 report by the World Bank highlights that digital platforms in Africa have created over 3.8 million gig jobs, with the potential to generate even more opportunities as digital infrastructure improves.
In Sub-Saharan Africa, the gig economy is particularly vital due to high unemployment rates and the informal nature of many economies. Moreover, the gig economy in Africa is estimated to contribute US$180billion to the continent’s GDP by 2025, driven by sectors such as ride-hailing, delivery services and freelance work.
Countries like Kenya, Nigeria and South Africa are leading the way, but Ghana is also experiencing significant growth in this sector.
The gig economy in Ghana
In Ghana, the gig economy is becoming an increasingly important part of the labour market, particularly for the youth. As reported by Fairwork Ghana report in 2021, it was estimated that the gig economy created between 60,000–100,000 job opportunities for Ghanaians.
Moreover, according to a 2023 report by Jobberman Ghana, over 60 percent of Ghanaian youths have engaged in gig work at some point, with ride-hailing and delivery services being the most popular sectors. Platforms like Bolt, Yango and Jumia Food have become household names, providing income opportunities for thousands of Ghanaians.
The rise of mobile money and digital payment systems has further facilitated the growth of gig work in the country. However, gig workers often face issues related to job security, income volatility and lack of access to traditional employment benefits such as health insurance, retirement plans and workers’ compensation.
These challenges are compounded by the fact that many gig workers are classified as independent contractors rather than employees, which limits their legal protections and access to benefits.
As a result, there is a growing demand for innovative solutions that address the unique needs of gig workers, particularly in the area of financial security and risk management.
The intersection of Insurtech and the gig economy
The intersection of Insurtech and the gig economy represents a fertile ground for innovation, as Insurtech companies seek to address the unique insurance needs of gig workers.
Traditional insurance models, which are designed for full-time employees and long-term commitments, are often ill-suited to the flexible and transient nature of gig work. Insurtechs, with their focus on technology-driven solutions, are well-positioned to fill this gap by offering products that are tailored to the gig economy.
One of the most promising areas of innovation is on-demand insurance, which allows gig workers to purchase coverage for specific periods or tasks. For example, a ride-hailing driver may only need insurance coverage during the hours they are actively driving, rather than paying for a full-time policy.
Companies like Slice and Trov offer on-demand insurance products that cater for this need, providing flexible and affordable coverage that aligns with the irregular work patterns of gig workers.
Pay-per-use models are another innovation that is gaining traction in the gig economy. These models, which charge premiums based on actual usage rather than fixed rates, are particularly well-suited to gig workers who may not have consistent income streams.
For instance, Insurtech company Cuvva offers pay-as-you-go car insurance, allowing users to purchase coverage by the hour. This approach not only reduces costs for gig workers, but also aligns insurance premiums more closely with actual risk exposure.
Digital claims processing is another area where Insurtechs are making significant strides. By leveraging AI and machine learning, Insurtech companies can streamline the claims process, reducing the time and effort required for gig workers to receive compensation.
For example, Lemonade’s AI-powered claims bot can process and pay claims in as little as three seconds, offering a level of convenience and efficiency that is particularly appealing to gig workers who may not have the time or resources to navigate traditional claims processes.
Partnerships between Insurtech firms and gig platforms are also playing a crucial role in addressing the insurance needs of gig workers. Companies like Uber and DoorDash have partnered with Insurtech providers to offer tailored insurance products to their drivers and couriers. For example, Uber has collaborated with Insurtech company Sure to provide on-demand insurance for its drivers, while DoorDash has partnered with Stride to offer health insurance benefits to its delivery workers.
These partnerships not only enhance the value proposition of gig platforms, but also provide gig workers with access to essential insurance products that they might not otherwise be able to afford.
However, the intersection of Insurtech and the gig economy is not without its challenges. Regulatory hurdles, particularly in terms of worker classification and insurance licensing, pose significant barriers to market adoption.
Additionally, the fragmented nature of the gig economy, with its diverse range of platforms and workers, complicates the development of standardised insurance products. Insurtech companies must navigate these challenges while also addressing the unique risk profiles of gig workers, which can vary widely depending on the nature of their work.
Insurtech opportunities in the gig economy
The gig economy represents a significant and largely untapped market for Insurtechs, offering immense potential for growth and innovation. According to a report by Deloitte, the global Insurtech market is expected to grow at a compound annual growth rate (CAGR) of 48.8 percent from 2021 to 2028, driven in part by the increasing demand for insurance solutions tailored to the gig economy.
This growth is fuelled by the recognition that traditional insurance models are ill-equipped to meet the needs of gig workers, creating a demand for more flexible, affordable and accessible products.
Investment trends in Insurtech also reflect the growing interest in the gig economy. Globally, the sector is projected to attract over US$15billion in venture capital by 2025, with a significant portion directed toward start-ups serving the gig economy.
Companies like Next Insurance and Zego, which have raised US$250million and US$150million, respectively, are expected to expand into emerging markets. By 2030, the industry is forecast to grow at a 25 percent CAGR, driven by gig-focused innovations. In Africa, Insurtech is set to grow alongside the gig economy, which is expected to contribute US$180billion to GDP by 2025.
African start-ups are projected to secure US$1.2billion in funding, with Kenya, Nigeria, South Africa and Ghana emerging as key markets. Ghana’s gig workforce is expected to reach 2.5 million by 2025, creating demand for tailored insurance solutions. Insurtech firms are likely to leverage technology to address income volatility and job security, positioning Ghana as a rising player in digital insurance.
However, some industry leaders also caution that Insurtechs must navigate regulatory challenges and market adoption barriers to fully capitalise on this opportunity.
Conclusion and recommendations
Finally, as the gig economy continues to evolve, so too will the insurance needs of gig workers. Insurtechs must remain agile and responsive to these changes, continuously developing new products and services that meet the evolving needs of this dynamic workforce.
By doing so, Insurtechs can position themselves as key players in the gig economy, driving growth and innovation in the insurance sector while contributing to the financial security and well-being of this unique group of independent workers.
David Doe Fiergbor
Lead, Digital & Partnerships
Banbo Insurance Brokers
Email: [email protected] Tel: +233249915690
