Consumer Watch: Income protection for freelance workers
Freelancers, gig workers, independent contractors, and those in “unorthodox” occupations, such as tattoo artists, can now protect their income in the event of illness or disability. FMI, a division of Bidvest Life, has launched an income protection product for this category of earners who otherwise would not qualify for traditional income protection cover.
FMI says South Africa has nearly 4million independent contractors. These workers, because of their occupation status, have been excluded from qualifying for traditional income protection cover.
The impact of Covid-19 on the already strained job market has forced more people to seek additional income streams and pushed more into informal working arrangements - a market that has been overlooked for far too long, FMI says.
Steve Piper, chief distribution officer at FMI, says deciding to expand the range of occupations eligible for cover was in line with the insurer’s “income first” approach, which aims at protecting a person’s income against injury, illness or death.
He said the long-term industry has struggled to ensure that consumers in non-standard occupations, high-risk occupations, or with multiple income streams have appropriate cover available to them.
In 2015, FMI extended event-based cover for occupations such as au pairs, heavy-duty electricians, coaches, referees and sportspeople, including extreme athletes, students, pilots, artists, musicians and entertainers, oil rig workers, commercial divers, and health and fitness instructors.
The expanded cover extends this list of occupations even further.
Cover is calculated based on income received over a year.
Elmarie Samuel, the insurer’s senior technical marketing specialist, says: “Traditional insurance models do not sufficiently cater for these individuals, who are often not working consistently, have no formal contracts in place, or are unable to define what their anticipated income will be at any given point. But this doesn’t change the fact that someone working in the gig economy has as much of a need to protect their income as someone who is formally employed.”
Insurers are not particularly good at offering cover to unorthodox workers, or those who do not fit neatly into the classically employed category, says Nick Smit, the head of product and pricing.
“Your occupation might be low risk but how you earn your income is problematic for insurers because it doesn’t tick their boxes,” he says.
But it has become increasingly difficult for the industry to justify this approach.
Samuel said that critical illness income protection is a big part of FMI’s offering. Historically, this type of protection was seen as a lump-sum benefit that pays out if you suffer a stroke, heart attack or cancer.
“Ours still has that benefit, but there is also a critical illness income component, which pays 130% of your income over a year,” she says. “When you are diagnosed with a critical illness, having your income taken care of allows you to recover without stressing.
“The Covid-19 pandemic has highlighted the importance of being able to earn. Income protection should be the foundation of any life insurance policy - not an afterthought,” Samuel says.