First Principles First: Covering Bases — De-risking insurance for platform workers in India

OMI Foundation
9 min readMay 13, 2024

By

and Prakash Gupta
The insurance landscape is a crucial aspect of modern life, touching the lives of individuals from diverse backgrounds, including employees, freelancers, retirees, politicians, and informal workers. Insurance companies, in their pursuit of financial viability, develop business models that cater to the needs of various groups. This often leads to varying costs for consumers, with some finding insurance expensive and inaccessible.

Within India’s thriving platform economy, a unique opportunity arises to explore the role of insurance in supporting the growing number of gig and platform workers. Platform workers, by their very nature, are a heterogenous lot. Students, factory workers, shopkeepers, and self-employed individuals in the unorganised sector, can also hold the identity of a platform worker if they earn through digital platforms and engage others for work. This dual identity is common among those affiliated with multiple platforms, with earnings varying daily or monthly based on the nature of their work and industry. India has taken a pioneering step globally by ensuring social protection for all, including these new-age workers (OMI Foundation, 2024).

How can insurance be extended to platform workers in ways that mitigate the risks associated with this sector?

By asking this question, we hope to make insurance truly affordable and accessible to all, ultimately enhancing the financial security of platform workers and contributing to a more inclusive economy.

Insurance and Risk Management

Traditional Underwriting:

Insurance companies determine risks for an individual primarily through a process known as underwriting. This process involves several key steps to evaluate the risk associated with insuring a person or entity and setting the pricing terms of the insurance policy. The process includes various steps, as outlined in Figure 1.

This image illustrates the traditional underwriting process followed by insurance companies. Stages: Collection of Information, Risk Assessment, Credit Scoring, Use of Acturial Tables, Adjustment of External Factors, Setting Premiums, and On-Going Risk Evaluation
Figure 1: Steps included in traditional underwriting process; Sources: (Oracle Insurance Data Foundation, n.d.; Rhinehart, n.d.; Faster Capital, 2024)

Challenges for Platform Workers:

Assessing risk for platform workers through insurance underwriting can be uniquely challenging due to the non-traditional nature of their work.

Table containing challenges associated with providing insurance to platform workers
Table 1: Challenges associated with providing insurance to platform workers; Source: Author

Insuring platform workers presents unique challenges due to their non-standard work patterns and non-fixed incomes, necessitating adaptations in the insurance underwriting process. Variable work hours and job types demand dynamic pricing models and customised risk categories to accurately reflect gig-specific exposures. Continuous monitoring and the use of technology are essential for adjusting coverage in real-time based on changes in platform workers’ work statuses. The implication is that while the risk of insuring platform workers is notably high due to these complexities, the associated premiums cannot be proportionately excessive without undermining the viability of the coverage. Insurers are thus challenged to innovate within their underwriting processes and policy terms to provide feasible, fair coverage that acknowledges the unique risks without imposing unsustainable costs on platform workers.

Insurance Solutions

How do Insurance Companies Typically Address the Challenge?

Insurance covenants play a crucial role in curtailing risks for platform workers by providing tailored, flexible, and comprehensive coverage options.

  • Tailored Coverage Options: Providing flexible, comprehensive plans that include risk pooling to distribute financial risks across a broader population, thereby stabilising premiums.
  • Tiered Coverage: Allows platform workers to choose plans that fit their risk exposure and budget, maintaining essential protection affordability.
  • Preventative Measures: Integrating wellness programs and safety courses to reduce claims and stabilise insurance costs.
  • Advanced Analytics and AI: Enhancing risk prediction and tailoring of premiums through cutting-edge technology. Dynamic pricing models adjust premiums in real-time to accommodate changing work patterns.
  • Collaborative Efforts: Forming partnerships with platforms and leveraging government subsidies to foster innovative insurance models like usage-based or cooperative insurance, where workers have a stake in the insurance entity.

How are Indian Insurance Companies Adapting?

  • Specialised Insurance Products: Developing offerings specifically designed for the gig and platform economy, addressing fluctuating incomes and occupational hazards.
  • Flexible Premium Payment Options: Ensuring affordability for workers with unstable incomes.
  • Comprehensive Coverage: Including accident and illness coverage, along with critical illness benefits.
  • Strategic Partnerships: Collaborating with platforms to enhance product accessibility and relevance, ensuring seamless integration into workers’ operations.
Table containing various offerings by Indian Insurance companies
Table 2: Some insurance offerings by Indian companies, detailing their features and benefits; Sources: (Policy Bazaar, n.d., Acko, n.d.)

Table 2 highlights various insurance offerings from Indian companies, tailored specifically to address the needs of gig and platform workers and their unique employment characteristics. Flexible premium payment options, such as those provided by Tata AIA Life Insurance Company, ensure affordability for workers with varying incomes. There is also extensive coverage for accidents and illnesses across multiple insurers, crucial for mitigating the financial impacts of health setbacks in high-risk jobs like delivery and ride-sharing. Income loss coverage and critical illness benefits further stabilise workers’ financial situations during health crises and work interruptions.

Future Directions

Risk-sharing

Most of the insurance products covered in table 3 are developed in partnership with platforms, ensuring that the offerings are not only accessible but also well-suited to the needs of platform workers. This widespread collaboration between insurers and platforms not only shows a strong alignment with the evolving demands of the platform economy but also indicates a shared approach to managing risk. This strategic partnership model helps distribute the risk and enhances the overall efficacy and reach of the insurance schemes. Reduced costs arise from insurers negotiating directly with platforms, enabling lower premiums through a larger pool of insured individuals. Additionally, platforms have access to detailed data on worker behaviours and patterns, enhancing insurers’ ability to assess and manage risks more effectively. For example, Karmalife, a fintech company in India, collaborated with CGAP to pilot financial services for platform workers, demonstrating the potential of platform work data in predicting creditworthiness and improving insurance product tailoring (Murthy, 2023).

Portability

Insurance benefits tied to specific platforms come with certain challenges for platform workers. It’s important to recognise that these issues, such as potential loss of coverage when switching platforms or feeling bound to a single platform due to insurance benefits, represent risks. To address these challenges effectively, it is essential to consider the portability of insurance benefits.

Given the nature of platform work, where individuals often do not have a single job provider, portability of insurance benefits would ensure that platform workers maintain continuous coverage regardless of the platform they choose to work with. Besides, tfhe risks associated with specific types of work, such as food delivery or ridesharing, are relatively consistent across different platforms. Therefore, making insurance benefits portable across platforms can provide comprehensive and relevant coverage that reflects the actual risks of the job, regardless of the platform through which the gig is obtained.

Portable benefits, which remain with workers regardless of their job creator or job status, are crucial in the platform economy where job fluidity is common. These benefits prevent lapses in coverage when workers switch roles or platforms, ensuring continuous insurance and promoting equity by providing all workers with necessary benefits, thus creating a level playing field regardless of employment status. This consideration is particularly crucial in a sector characterised by workers’ propensity to engage in multiple gigs without a long-term commitment to any single employer or platform.

Inter-platform agreements in the platform economy refer to collaborations between different platforms that allow insurance benefits to be carried over when a worker moves from one platform to another. This approach is similar to data portability in the tech industry, where users can transfer their information seamlessly between service providers. For workers, this means that their insurance, whether it’s health, accident, or liability, remains with them regardless of the platform they choose to work with at any given time.

Such agreements can be modelled on agreements between major telecom companies that allow customers to keep their phone numbers when switching carriers. In the platform economy, major platforms could agree on a standardised set of insurance benefits that any worker can access, which would not only simplify the insurance landscape but also ensure that workers retain continuous coverage despite changing work platforms. Such agreements would require platforms to work closely with insurance providers to develop uniform insurance packages that meet the needs of a diverse workforce. These packages would need to be flexible enough to cover various risks associated with different types of work, from driving and delivery services to freelance tech projects.

Inter-Platform Agreements

The implementation of inter-platform agreements to enhance insurance portability for workers does pose significant challenges, particularly in terms of API integration and the sharing of sensitive business data.

  • Data Sharing: For inter-platform agreements to work, platforms must be able to seamlessly share relevant data about workers to ensure continuous insurance coverage. This can be achieved with technologies like API (Application Programming Interface) integration and Blockchain.
  • API integration that allows different systems to communicate efficiently and securely. The key here is to develop standardised APIs that ensure compatibility and interoperability between different platform technologies. For example, the financial sector has seen success with APIs in open banking, where standardised APIs allow secure data sharing between banks and third-party providers, promoting innovation and improving customer service (Smith, 2020).
  • Blockchain could provide decentralised and transparent ways of managing and sharing worker data, potentially offering enhanced security and privacy compared to traditional centralised API integration. The distributed nature of blockchain could also help mitigate concerns around data ownership and privacy.
  • Navigating Sensitive Business Data: The sharing of sensitive business data, such as personal information of workers and details of their work engagements, raises privacy and security concerns. Platforms can navigate this by employing various measures, including implementing end-to-end encryption for data transfers, employing blockchain, establishing strict access controls and audit trails to monitor data usage, and developing data governance agreements that align with relevant data protection regulations in India, like the Digital Personal Data Protection Act 2023. By taking these steps, platforms can ensure the confidentiality and integrity of sensitive business data, while also maintaining transparency and compliance with the legal framework governing data privacy and security.
  • Collaborative Frameworks: To facilitate collaboration, platforms can form a consortium or join existing ones that aim to standardise worker benefits, including insurance. Such consortiums can help establish common standards and practices, reducing the complexity of integration and ensuring that all parties adhere to agreed-upon ethical and legal standards. A precedent can be seen in the telecommunications industry, where operators collaborate through the GSMA to standardise mobile services globally, enhancing interoperability and service continuity for customers (Williams, 2019).

Platform workers navigate a dynamic landscape characterised by flexible schedules, reliance on multiple platforms, and income variability. This unique environment calls for innovative insurance solutions tailored to their needs. While traditional models may fall short, the evolving integration of insurance benefits directly with platforms offers promising avenues for improved risk management and cost efficiency through data sharing and collective coverage. Despite the benefits, challenges like potential gaps in coverage during platform transitions or job changes exist. However, the emergence of inter-platform agreements and independent insurance pools signifies progress towards addressing these issues. These initiatives not only enhance the flexibility and relevance of insurance for workers but also ensure continuous and comprehensive coverage, promoting fairness in the evolving platform economy. This shift would signify a positive evolution towards a more equitable and sustainable insurance landscape for platform workers.

References

Acko. (n.d.). Get smart insurance solutions tailor-made for your business. Acko. Retrieved May 1, 2024, from https://www.acko.com/gi/partnerships

American Academy of Actuaries. (n.d.). Risk Pooling: How Health Insurance in the Individual Market Works. American Academy of Actuaries. Retrieved April 24, 2024, from https://www.actuary.org/content/risk-pooling-how-health-insurance-individual-market-works-0

Aziz, S., & Dowling, M. (2024, March 5). ,. , — YouTube. Retrieved April 24, 2024, from https://link.springer.com/chapter/10.1007/978-3-030-02330-0_3

Faster Capital. (2024, March 23). Underwriting: The Underwriting Process and the Select Mortality Table. FasterCapital. Retrieved April 24, 2024, from https://fastercapital.com/content/Underwriting--The-Underwriting-Process-and-the-Select-Mortality-Table.html

Frank, M. B., & hsu, J. (2015, March 9). The Impact of a Tiered Network on Hospital Choice. NCBI. Retrieved April 24, 2024, from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4600365/

ILO, ISSA, & OECD. (2023, January). Providing adequate and sustainable social protection for workers in the gig and platform economy. Wikipedia. Retrieved April 24, 2024, from https://webapps.ilo.org/wcmsp5/groups/public/---dgreports/---ddg_p/documents/publication/wcms_867535.pdf

Lehdonvirta, V. (2018). Flexibility in the Gig Economy: Managing Time on Three Online Piecework Platforms. Wikipedia. Retrieved April 30, 2024, from https://doi.org/10.1111/ntwe.12102

OMI Foundation. (2024, March). Social Protection in India’s Platform Economy: Unpacking Supply Dynamics. Retrieved April 30, 2024, from https://olawebcdn.com/ola-institute/social-protection-in-india-platform-economy.pdf

Oracle Insurance Data Foundation. (n.d.). Insurance Underwriting Entities. Retrieved April 24, 2024, from https://docs.oracle.com/cd/E92918_01/PDF/8.1.x.x/8.1.1.0.0/OIDF_HTML/811/UG/18_Insurance_Underwriting_Entities.htm

Policy Bazaar. (n.d.). Life Insurance for Gig Economy. Policybazaar. Retrieved May 1, 2024, from https://www.policybazaar.com/life-insurance/life-insurance-for-gig-economy/

Rhinehart, C. (n.d.). Underwriting Cycle: What it is, How it Works, Managing it. Investopedia. Retrieved April 24, 2024, from https://www.investopedia.com/terms/u/underwriting-cycle.asp

ABOUT FIRST PRINCIPLES FIRST: First Principles First is a series by OMI Foundation that explores the underlying principles that shape our understanding of mobility and its impact on our lives. This is OMI Foundation’s endeavour to navigate the complexities of mobility through the clarity of first principles.

EDITORS: Aishwarya Raman, Executive Director, OMI Foundation

SUGGESTED CITATION: Arora, J, Gupta P (2024, April). Covering Bases - exploring the challenges in offering insurance to platform workers in India. OMI Foundation

DISCLAIMER: OMI Foundation nor any party associated with this report will be liable for any loss or damage incurred by the use of this study. © OMI Foundation.

Copyright © 2024 OMI Foundation Trust

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OMI Foundation

OMI Foundation is a new-age policy research and social innovation think tank operating at the intersection of mobility innovation, governance and public good.