Crowd-based Insurance: A Sustainable, Non-Discriminating Approach to Obtain Coverage for Personal Risks

By Maudie Derks, Acture Groep and Tulpenfonds

Access to social protection is a big issue in the rapidly changing world of work. What is organized for platform workers? Especially when they act as independents, who manage their own work and don’t have the automatic access to social security that employees have.

Perhaps it is interesting to explore the development of what we would like to call: insurance by the crowd, “crowdsurance”.

Specifically geared towards creating a coverage for a temporary incapacity to work.

Let’s look at the Dutch approach

First let’s start comparing the employee with the independent worker on the coverage for a temporary incapacity to work that is arranged for them.

Employees in the Netherlands have an automatic coverage for their incapacity to work. When they become ill and are unable to work, they receive 70% of their last earnings for a maximum period of two years. In most collective agreements this is supplemented to 100% of their last earnings. A very comfortable safety net.

Independent workers have no automatic access to a coverage when they are unable to work due to illness. If they want to create a safety net, they have to take out individual insurance. This means high cost, low accessibility, a very individual approach only within reach for the happy few that earn a lot of money as independent worker.

What are the developments for the labour market on independent workers in the Netherlands?

Recently the Central Bureau for Statistics (CBS) reported 1.1 million independent workers by the end of 2020, who have this as their main source of income. This is 13% of the total labour market. If we also take into account the part-time independent worker 1.6 million people earn an income as independent worker. Since 2003 the amount of independent workers increased with over 500k workers. An undeniable trend.

At the same time, we see that the willingness to arrange for coverage for incapacity to work shows a declining trend. No more than 20% of all independent workers in the Netherlands have an insurance coverage on incapacity to work due to illness. All research done on this development shows that there is a lot of resistance against insurers, their overall image is poor.

They are being looked upon as offering poor service, low payout ratios on claims and not particularly interested in insuring the independent worker. Furthermore, the independent worker looks upon himself as very healthy and not in need of such a coverage. By no means a situation that stimulates participation in arranging coverage.

However, because of the constant and rapid growth of independ workers the government in the Netherlands wanted to look for a solution, stimulated by unions who found the current situation unacceptable. This resulted in the so called “Pensioenakkoord” (Pension agreement) of June 2019. In this “Pensioenakkoord” parties agreed that there should be a mandatory insurance for independent workers, a basic safety net of around €1800 max per month. Mandatory and to be executed by the public service UWV.

Apart from the fact that this decision created a lot of resentment on the part of the independent workers, since their voice wasn’t heard nor taken into account, the actual execution of the agreement also turned out to be very problematic. Both UWV and the Tax Authorities claimed they were unable to execute the agreements in the “Pensioenakkoord”.

However, one positive effect from the situation arose; all parties agreed that there should be a basic safety net for the independent workers, consisting of liability and incapacity to work coverage. (NB. Health coverage is taken care of in a different manner in the Netherlands and open to all citizens therefore there is no need to add this to the safety net).

At the other side of the spectrum, we saw a very different development. Both technologic developments and initiatives on a very local scale gave room to what we now call crowdsurance, insurance by the crowd.

What is crowdsurance?

Crowdsurance, insurance by the crowd, it makes use of the tax arrangement that allows donation of small amounts of money anonymously. People become participants in the crowdsurance solution, commit themselves to donating when necessary and by donating gain the right to receiving a donation back whenever this is necessary. The reason for donating is the potential incapacity to work. The amount you are asked to donate is limited to 5% of the amount you want to receive should you put in a claim.

Let me illustrate this with the following example:

You become a participant in the crowdsurance solution. You choose an amount of €1.000/month to receive should you need to claim because of incapacity to work.

Then another participant falls ill. Your maximum monthly contribution to his claim would be €50. The monthly donation stops when the claim is resolved.

There is no limit to the number of participants. The claims get managed by professional case managers and occupational physicians. The donations are anonymous, you don’t know who you donate to and the receiving party doesn’t know who he or she gets donations from. Therefore, it is also completely privacy proof.

The other interesting aspect of this solution is that in order to become a participant in the crowdsurance you only need to declare that you are 100% healthy for the profession that you have and that you do not expect to fall ill within 6 months after becoming a participant.

Now I see you frown… this is very easy! Perhaps too easy?

The facts state differently: on average the payout is between 1 and 1.5% per month. Much lower than in normal absenteeism insurances, who have a payout of around 3%.

This basic coverage can be expanded with a number of individual add-ons, like pension, liability, health coverage, life coverage, savings etc.

As I stated earlier, both the smart use of fiscal possibilities and new technology make this development possible. A clear proof that innovation and market awareness can actually offer solutions that are tailormade to the modern worker needs.

In fact, a number of organizations in the Netherlands, amongst others SamSam kring, SharePeople and Tulpenfonds already offer various options of the crowdsurance solution to the market. Both with and without cooperation with standard insurers.

In our view the crowdsurance solution goes back to the origin of insuring. A collective takes care of an individual risk when necessary and because of the volume of the crowd the individual contribution is very acceptable.

The next interesting thing about the crowdsurance solution is that the cost are completely transparent, you donate directly with very little cost and you pay a subscription fee to the organizer of the crowdsurance. Therefore, costs are low and transparent to all participants.

The most interesting thing about this solution is that every European country has some kind of fiscal possibility to donate anonymously. What varies per country is the amount of money someone can get donated from one individual to another, but the basis of a fiscal possibility to donate anonymously is created in every tax system in Europa and the UK.

This creates enormous possibilities to use the crowdsurance in an individual country, across borders or even as a European platform.

Let’s imagine every European Uber driver or Deliveroo rider could participate in the Uber or Deliveroo Crowdsurance. You could then offer a coverage of (for instance) 70% of their income with the platform and create a total tailormade coverage for incapacity to work!

I can imagine this to be a very interesting solution for platforms to explore and invest in.

My dream

My dream is to design and organize the new social security safety net in Europe. By using new technology and existing legislation thus creating a new standard for European social security. To contribute to the wish that independent workers get their safety net arranged in the way that Europe stands for. We offer income protection to people that work hard for their money, we take care of people that are temporarily unable to work.

Dream with me and make it happen!

The opinions and views expressed in this publication are those of the authors. They do not purport to reflect the opinions or views of Reshaping Work.