Category Life Insurance

Life Insurance for the Gig Economy and SMEs: What You Need to Know

12 July 2024 Schalk Malan (BrightRock CEO)
Schalk Malan (BrightRock CEO)

Schalk Malan (BrightRock CEO)

The gig economy and small and medium enterprises (SMEs) are pivotal to South Africa's economic landscape. With unemployment rates soaring and traditional job opportunities becoming increasingly scarce, more South Africans are turning to freelance work and entrepreneurship. While these sectors offer flexibility and innovation, they also present unique challenges, particularly regarding financial security and risk management. One crucial aspect often overlooked is life insurance.

The South African Gig Economy and SME Landscape

South Africa's gig economy is experiencing rapid growth. A study by the World Bank in 2022 highlighted that approximately 10% of the country's labour force is engaged in some form of gig work. This includes freelancers, independent contractors, and part-time workers. Similarly, SMEs play a significant role in the economy, making up more than 90% of formally registered businesses in South Africa. They employ more than half of the labour force, and account for more than a third of GDP, according to a report by the South African Business Integrator.

The Importance of Life Insurance for Gig Workers and SME Owners

Life insurance provides a financial safety net for individuals and their families in the event of unforeseen circumstances, such as death or severe illness. For gig workers and SME owners, this safety net is crucial. Many gig workers and SME owners are the primary breadwinners for their families. Life insurance ensures that dependants are not left destitute if the worst happens. Moreover, for SME owners, life insurance can be a key element of business continuity planning. It can provide the necessary funds to settle debts, manage operational costs, or even facilitate a smooth transition of ownership. Owners often have personal and business-related debts. Life insurance can cover these liabilities, preventing the burden from falling on family members or business partners. Knowing that there is a financial backup in place allows individuals to focus on growing their business or career without the constant worry of financial insecurity.

Identifying Challenges in Accessing Life Insurance

Despite the clear benefits, gig workers and SME owners face several challenges when it comes to securing life insurance. Unlike salaried employees, they often have fluctuating incomes, which can make it difficult to commit to regular insurance premiums. Insurance companies may view SMEs and freelancers as higher risk due to the instability associated with their income streams. This can result in higher premiums or even difficulty in obtaining cover. Additionally, many individuals in these sectors are not fully aware of the importance of life insurance or how to go about obtaining it.

Tailored Solutions for the South African Market

Addressing these challenges requires a tailored approach from insurers. Traditional business insurance plans are inflexible, and structured like personal life insurance, which doesn't always fit the unique needs of businesses.

Clients face significant challenges with their insurance cover when they become self-employed or experience a loss of income. For those with fluctuating incomes or a lag between work done and income received, providing proof of loss of income can be difficult, which often prevents them from receiving payouts from their insurer during temporary disability.

Insurance is an essential component of financial planning for the SME sector in South Africa. By addressing the unique challenges faced and offering tailored solutions, insurers can play a pivotal role in enhancing the financial security and resilience of a significant portion of the workforce. With the right products, education, and support, insurance can provide the peace of mind that allows entrepreneurs to thrive in their entrepreneurial endeavours.

Quick Polls


How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?


Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now