The first installment in the Bold Penguin series on Unique Risks For Evolving Industries addresses the risks of digital entrepreneurs in an evolved, post-pandemic landscape and the resulting recommended insurance for freelancers and online retailers.
Unique Risks For Evolving Industries is a six-part educational series crafted to help insurance agents navigate the unique risks of industries that have evolved in a post-pandemic world. Each month, Bold Penguin will explore one unique industry that was significantly impacted by the social and economic shifts of COVID-19. We’ll discuss how the industry has evolved, trends, associated risks, and actionable tips to ensure the entrepreneurs of today are protected. January’s focus is risks and insurance for freelancers in the digital space, along with online retailers. The complete Unique Risks For Evolving Industries 2025 Report will be available in July.
Contributed by Nicole Farley, Vice President of Carrier Operations at Bold Penguin. As VP of Carrier Operations, Farley works to streamline the commercial quoting experience for agents and small business owners, working closely with several large enterprise partners and carriers to achieve mutual short and long-term goals and objectives.
As we highlighted in the series introduction, new business startups have boomed since 2020, with a record-breaking 5.5 million new business applications in 2023. The pandemic ushered in:
And those are just a few of the many socio-economic factors that emerged during the COVID-19 pandemic and helped shape a business landscape primed for growth and entrepreneurship.
The “side hustler” entrepreneur, or the individual who worked for income supplementary to one's primary job, became a household term. For this post, we will concentrate on two noteworthy subcategories within the side hustle umbrella: online retailers (those who opened an e-commerce business) and digital freelancers (those who offer digital services like IT consulting or web design) and how they have experienced extraordinary growth due in part to the factors outlined above.
The historic shift in supply and demand for these side hustlers ushered in new, evolved, associated risks. Many of these pandemic-born entrepreneurs pivoted to this new model for various reasons. For instance, many simply want to earn extra income or transition away from their current “day job,” while others seek to develop new professional skills or to fulfill a longstanding desire to become a business owner. Regardless of the freelancer’s motivation, agents and carriers are stepping up to help provide the right insurance for freelancers and online retailers, protecting their newfound dreams, passions, and businesses against the unique risks they face.
Paul Spelman, Senior Vice President, Underwriting Management, with Hiscox USA stated in a recent interview, “We insure a lot of first-time buyers of business insurance, many of which are start-ups or ‘side hustles’ that might be home-based businesses or part-time efforts. These businesses are the backbone of the economy, pillars in our local communities, and often turbocharge innovation across the U.S.”
Online retailers, in particular, experienced incredible growth during the pandemic due to the easy access to e-commerce platforms and tools and an increased demand for convenient online shopping. According to the U.S. Bureau of Labor Statistics, “While the surge in new business applications [in 2020] was ‘uneven across sectors,’ the largest increases were in the non-store retail sector (alone accounting for 1 out of every 3 new businesses formed during the pandemic) and the personal services sector. This finding reflects another continuation of a trend: the shift toward e-commerce, with small businesses now selling goods and services online instead of renting a storefront.” This growth in the non-store retail sector needs to be protected with insurance.
Insurance for freelancers is equally important for those who provide digital knowledge services, another large group of freelancers who experienced unprecedented growth during the pandemic. According to Statista, in 2023, there were 64 million people (about twice the population of Texas) doing freelance work in the U.S., up from 53 million in 2013. Even more noteworthy is that “47% of all freelancers provided knowledge services such as computer programming, marketing, IT, and business consulting in 2023,” according to Upwork Research Institute’s 2023 Freelance Forward survey.
The locations of these new ventures are yet another noteworthy trend. Becky Monfre, Vice President of Digital Distribution with Coterie, shared that “currently at Coterie, we estimate that nearly 30% of the businesses we insure are home-based occupancy or new ventures.” More information is below on how to address the misconceptions associated with protecting the risks of home-based ventures.
The noteworthy trends cited above reiterate that these aren’t just circumstantial statistics associated with the COVID era. They confirm a few unexpected results of the pandemic. These professional and economic shifts are indicative of larger professional trends that are here to stay.
Case in point: in 2021, Upwork published a One Year Remote study and cited, “58% of non-freelancing professionals new to remote work are considering freelancing in the future. The past year’s shift to remote has introduced many professionals to the benefits of greater flexibility and control on how they work, and freelancing will be for some a natural next step.”
As they pursue their dreams, professionals considering this shift will need protection in the form of optimal insurance for freelancers. And it’s worth mentioning that the vast majority of these entrepreneurs likely have personal insurance already, and a relationship with a personal insurance agent, so there is immense opportunity for growth for the insurance agency as well.
So, what is a foundational step in the side hustle or self-employment journey? Safeguard the dream. As trusted advisors to any business owner, regardless of size, it starts with analysis of risks, research, and meaningful conversations. “For any side hustle, the question is: what could go wrong, or what could we be accused of doing wrong (even if we didn’t do it wrong)? The answer will often lead the entrepreneur to the risks that need to be protected against and insured,” continued Spelman.
At their core, these entrepreneurs aren’t different from many of the other established, larger commercial entities. They are just new to the risks. Addressing the knowledge gap about needs for insurance for freelancers will be a crucial step. “Many of the true business risks of freelancers and side hustlers are often fundamentally no different from those of more established businesses with multiple employees that might be doing the same thing. For a home-based entrepreneur who might start a 1-person business online or even offline, he/she still has to think about protecting the business property from loss/damage and protecting the business from liability associated with mistakes or deficiencies that could cause harm to others,” continued Spelman. “Anyone selling products/services to others is taking on risk, but often a ‘side hustle’ business may assume they don’t need insurance. That’s simply not true.”
For those new to e-commerce, “when you’re reselling, relabeling or acting as a distributor for any product, it is important to understand where your core products are coming from and to document the chain of distribution. For example, let’s pretend your business is to create and sell pet collars. Perhaps you purchase the fabric, clasp, and rhinestones from three different manufacturers. Your business processes should include documenting the origin of materials and tracking your stock. If there were an incident when beloved Fluffy was wearing her rhinestone collar and got loose as a result of a faulty clasp, you’d want to be able to trace those steps for your insurance provider,” said Monfre.
She continued, “having a lawyer review the labeling and product guarantees will help to protect you from product liability issues. Another best practice is to make sure you understand what contracts, hold harmless agreements, or waivers you have signed. Having proper limits and appropriate coverage is all important, but also understanding the contracts you are entering into and how that changes your insurance needs is equally important. All of these items are risk management and risk mitigation techniques to consider.”
While operating an online store might be less complicated than running a brick-and-mortar store, it still has risks. NEXT Insurance recently published an informative piece on the Hidden e-commerce risks and how to dodge them. For instance, “What if your [online stores’] products or services cause customers harm? For example, a customer might develop a rash from using your homemade soap.” These are exposures that an online retailer might not be aware of without the help of their insurance agent to consider their business model, associated risks, and necessary insurance for freelancers.
When it comes to digital freelancers, Spelman shared this advice: “Any side hustle that requires professional certifications and offers professionally trained skills/services should consider professional liability coverage (often called Errors & Omissions) to protect themselves in the case they make a mistake.” He continued, “Almost all businesses need workers’ compensation if they have employees other than the business owner. Similarly, any business that has an automobile used primarily for the business would need commercial auto coverage.”
It’s important for agents to have discussions with these entrepreneurs and address any wrong (or right) preconceived notions about insurance for freelancers, such as cost.
“One common myth is the cost of insurance. Having proper coverage doesn’t have to be expensive. Oftentimes [the insured parties] are being rated on their sales or payroll, so if their business is small, the costs associated with it are also often small. Insurance is there to cover and protect for the moments you aren’t expecting,” said Becky Monfre, VP Digital Distribution, Coterie.
Another misconception relates to where the business is located. “Typically homeowners and renters policies do not insure a home-based business and even if some coverage is offered, it is often minimal compared to what the business truly needs in the event of a claim. This is where small business insurance comes in, even for part-time businesses,” continued Spelman.
And in this digital age, no business is immune to a cyber attack regardless of size, industry, or tenure of the business. Spelman continued, “One of the big misconceptions in the small business ecosystem is that cyber risks only apply to larger businesses. In fact, any business that uses computers, has a website, or even stores customer data offline can be a victim of cybercrime. Side hustle businesses that sell or interact with customers online may be collecting customer information that makes them a target for a cyber attack. Because side hustlers are very often using personal computers, laptops or even running their business over the phone, cyber protection may only be as good as the default protection of the vendors who sell those products. For businesses that collect/store valuable information online, or who have any kind of customer information in their electronic records/inventory, additional protective measures including cyber insurance coverage makes good sense to consider.”
Getting to know the unique products and services of these entrepreneurs is key to making sure their assets are properly protected with insurance for freelancers in the digital space and online retailers. Because every business is unique, it's essential to tailor their coverage solutions. Tailored solutions can include a full suite of products to enhance a traditional policy with additional coverages, like hired & non-owned auto for situations where the insured uses a personal auto for business use or even workplace violence coverage which has become an unfortunate reality.
Monfre recommends “reading the policy [with the insured] to help them understand coverages, exclusions and limit needs. Businesses [will need to understand] proper products liability coverage, their coverage territory, and what types of activities and products may be excluded.”
Understanding the business and what they do involves a sincere commitment to seeing the world from their vantage point and having the curiosity to dig deeper to get to know their business inside and out. Click below for more tips to get to know digital freelancers and online retailers better.
Digital freelancers and online retailers represent modern entrepreneurship, embodying a seismic shift in how and where businesses operate and grow. Fueled by technological accessibility, evolving consumer behaviors, and a desire for flexible work, these pandemic-era ‘side hustlers’ have thrived, contributing significantly to innovation and economic resilience. However, their rise has also introduced new risks and challenges, underscoring the need for thoughtful protection and support.
By addressing misconceptions, educating entrepreneurs about potential liabilities, and providing tailored insurance for freelancers, agents play a crucial role in safeguarding these businesses. As the landscape continues to evolve, empowering these small but mighty ventures ensures not only their sustainability but also their contribution to a dynamic, forward-looking economy.
Wondering where to begin? Click below to download a convenient list of questions to consider when discussing coverage with digital freelancers and online retailers.
The preceding article is part one of a six-part educational series crafted to help insurance agents navigate the unique risks of industries that have evolved in a post-pandemic world, with the purpose of keeping commercial insurance agents abreast of industry trends. The complete Unique Risks For Evolving Industries 2025 Report will be available in July.
Contact Bold Penguin with questions about this series or how we can work together.
The first installment in the Bold Penguin series on Unique Risks For Evolving Industries addresses the risks of digital entrepreneurs in an evolved, post-pandemic landscape and the resulting recommended insurance for freelancers and online retailers.
Another Bold year of growth and innovation
Introducing a new series on the unique risks of industries in a post-pandemic world and how to help successful entrepreneur clients thrive