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Shift to on-demand workforce exposes gaps in disability insurance

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ORLANDO, Fla. — Workers compensation needs to evolve to keep up with today's growing on-demand economy, experts urge.

People can make and deliver goods and services without a formal employment relationship as a result of the on-demand or sharing economy, said Steve Klingel, president and CEO of the National Council on Compensation Insurance Inc.

“Your neighbor could end up being your chauffeur, could be running around doing errands for you or you might even rent a room for visiting relatives from them,” Mr. Klingel said. With the ability to telecommute from just about anywhere, “the employees we're going to see coming on the scene will work where they want and when they want,” he said, referring to a group that spans all generations.

Several speakers at the workers comp ratings and research organization's 2015 Annual Issues Symposium in Orlando, Florida, this month said the insurance industry needs to evolve along with workplaces and the workforce.

“If you think we have struggles with (the) employee versus independent contractor (debate) today, it's going to become a lot trickier,” Mr. Klingel said, adding that investigating a workers comp claim also is likely to become much more complex.

While the evolving workplace and employer-employee relationships can benefit the economy and workers seeking supplemental income, the insurance industry isn't sure how to “provide protections” for an on-demand economy, Insurance Information Institute Inc. President Robert Hartwig said during the symposium.

As on-demand companies such as ride-sharing firms Uber Technologies Inc., room or home rental firm Airbnb Inc. and crowdsourced invention business Quirky Inc. become more popular among workers, creating new definitions of workplace accidents and injuries become more important. In the meantime, insurers can educate on-demand workers that they may need to buy their own insurance, experts said.

For example, Mr. Hartwig said people might not know that a private passenger automobile policy won't cover the commercial use of their vehicle or that homeowners insurance will not cover them if they're using their house as a hotel.

“Unless you've self-procured your workers comp coverage, an on-demand worker — an independent contractor, in other words — may not have any workers comp recourse if they're injured in the performance of their duties,” Mr. Hartwig said.

Independent contractors have become more common as the working world has gone from “a physical environment to a digital environment,” said Salim Ismail, global ambassador and founding executive director of education and business accelerator firm Singularity University.

“We will likely lose a couple billion jobs locally over the next 20 years, but that means the concept of a job as you see it today,” said Mr. Ismail, formerly a vice president at Yahoo Inc. But losing a job is not the same as losing work, he said.

“Whenever we see a big technological injection, we see a temporary dip (in employment) and then we find other things for people to do,” he said.

Some say new technology that matches workers and jobs faster than ever before “frees workers from the bonds of centralized and hierarchical institutions,” Mr. Hartwig said. But others say that “jobs are being reduced to nothing but freelance temporary gigs.”

Some people fear the on-demand economy could mean the end of workers comp, retirement benefits, sick pay, maternity leave, overtime, minimum wages, health insurance, liability coverage and employment stability in general, experts said.

“As the economy changes in the postindustrial era, workers compensation has to change with it,” Mr. Hartwig said.

But it's not clear what workers comp will look like in the future, experts agreed.

“So far, the Ubers of the world have been successful in arguing they are software platforms, not employers,” Mr. Hartwig said. “Even though in another context they'll say, "We created all these jobs.' “