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What insurers need to know about the micro-business market

Micro-businesses represent a big opportunity for insurers. More and more people are eschewing traditional jobs to start home-based companies or participate in the gig economy. Micro-businesses provide a wide variety of products and services, all operating as sole proprietorships or with few employees. This article defines micro-businesses as having four employees or fewer.

Verisk research reveals that 43% of small businesses with under 100 employees are uninsured.1 That lends credence to the assertion that micro-businesses are a potential untapped market for insurers—unique in many ways with specific needs, risks, and exposures. Neither commercial nor personal insurance programs were traditionally designed to address these micro-businesses.

Understanding the micro-business marketplace

Micro-businessowners dominate the small business space in sheer number of operations:

  • 80% of all U.S. businesses have no employees2
  • 69% of entrepreneurs start their business in their home3
  • About 50% of all firms are home-based4

Micro-businesses come in different forms and provide a broad range of products and services. One of the most commonly known types is the home-based business, where operations are primarily conducted out of the home but can take place at other locations as well. For example, a baker may prepare their products in a home-based or shared-space kitchen but sell the products in a variety of outlets like farmers markets or online.

Shared-space businesses are a growing trend in retail and service industries. This refers to when more than one business rotates to share a location. These include pop-up vendors where there is a single location with rotating stores, mobile shops that appear at festivals or fairs, state-of-the-art automated vending operations, commercial kitchens, and professional offices with coworking memberships.

Micro-businesses often include people who work in the gig economy. The gig economy generally refers to workers who hold temporary positions, organizations that contract with independent workers for short-term engagements, and other part-time models. The gig economy is a large influencer of the micro-business marketplace. According to a report by Cake & Arrow,5 as of 2014, 34% of the U.S. labor force—54 to 68 million people—was composed of independent workers. That number is expected to grow to 40% by 2020.

Other statistics show the broad character of micro-businesses and the opportunity for insurers:

  • Through shared kitchens, the food delivery market could grow from $35 billion to $365 billion by 2030.6
  • The U.S. Census Bureau reported U.S. e-commerce sales for the second quarter of 2019 totaled $146.2 billion (adjusted for seasonal variation), an increase of 4.2% from the first quarter.7
  • The Cake & Arrow report estimated that only about 18% of gig economy workers have insurance.8

Micro-businesses are incredibly varied. They encompass artisans making apparel, food, jewelry, and home décor; online vendors selling everything from clothing and accessories to grocery specialties and pet supplies; direct-selling businesses offering all those items and more; and businesses offering professional services.

Modern trends will also affect micro-businesses. Amazon has opened e-commerce possibilities for even the smallest of businesses—in fact, more than half of all items sold through Amazon are by a third party.9 And Amazon is only one of many e-commerce platforms. The gig economy offers new distribution models for home-based and shared-space businesses, and the proliferation of shared-platform technology will change the way they do business.

Challenges for insurers

Micro-businesses differ from brick-and-mortar and traditional businesses in many ways:

  • No structure coverages
  • Policies that share premises liability risk
  • Limited property exposures
  • Often the business moves quickly to a different shared space
  • Standard equipment and tools liabilities
  • Unique workers’ compensation issues
  • Difference between micro-businesses and traditional BOP

Compounding the challenge is the fact that many micro-businessowners are reluctant to seek  insurance. Home-based businessowners may believe personal insurance policies cover the activity. Many may feel coverage is too expensive or find it difficult to understand. And many may think that insurance coverage is unnecessary. The micro-businessowner requires education on insurance, and that often falls to the insurer.

Moving forward

The micro-business market is a ripe opportunity for insurers and growing every day. Micro-businessowners are potential insureds, no matter where they are in their life cycle. Many micro-businesses will transform into small and medium-size insurable businesses, so investing in them from inception is key for growth and cross-selling potential. Insurers could benefit from understanding the current state of this market, work to take advantage of the opportunity, and prosper in this space by developing a micro-businessowners plan.

  1. Eric Price-Glynn, “Re: MicroBOP article for Visualize,” e-mail on MarketStance data, addressed to John Luciano et al, February 12, 2020.
  2. U.S. Small Business Administration Office Of Advocacy, “Frequently Asked Questions About Small Business,” August 2018,
  3. Jana Kasperkevic, “Study: Most U.S. Entrepreneurs Start Their Business at Home,” Inc., June 2013,
  4. Ben Gran, “2018 Home-Based Business Statistics,” incfile, April 2018,
  5. Christina GoldSchmidt and Emily Smith, Insurance in the Age of the Gig Economy, Cake & Arrow white paper, December 2017,
  6. Jonathon Shieber, “The Next Big Restaurant Chain May Not Own Any Kitchens,” TechCrunch, October 2018,
  7. U.S. Census Bureau News, “Quarterly Retail E-Commerce Sales 2nd Quarter 2019,”
  8. C. GoldSchmidt and E. Smith,
  9. J. Clement, “Third-party seller share of Amazon platform 2007-2019,” Statista, November 2019,

Joseph Lam

Joseph Lam is director of commercial casualty product development and can be reached at

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