Rise in self-employment in oil and gas sector creates new demand for liability insurance23rd June 2021
Hiscox responds with new oil and gas product for US energy consultants.
The collapse in the oil price in 2020 saw many producers having to pay buyers to take it away given the shortage of storage capacity. It may have been the first time that US oil prices had slipped into the negative but, since 2014, oil prices have traded well under US$100 per barrel, and way off 2008’s record high price of close to US$150 per barrel.
For energy companies, the pandemic-induced price shock was an unwelcome reminder of the need to control costs at a time when the price of the product can no longer be guaranteed to deliver healthy profit margins. And even an expected post-pandemic rebound is unlikely to come to the rescue. According to the International Energy Association, “The forecast for global oil demand has shifted lower, and demand could peak earlier than previously thought if a rising focus by governments on clean energy turns into stronger policies, and behavioural changes induced by the pandemic become deep-rooted.”
Given this uncertain outlook, restructuring to meet the cost challenge has been the watchword, and one area where companies have looked to adapt is in their employment model. As Deloitte says, in a recent study on the future of work in oil, gas and chemicals, “For task-based, on-demand, or transactional roles, leading organizations should consider exploiting new and off-balance sheet resource models that lower fixed cost and minimize business disruption.”
Moved off payroll
Businesses have responded and more attention has been paid to those employees who can be moved off the payroll. “Oil and gas companies have long employed full-time specialist consultants in a variety of roles who often worked on an ‘as and when’ basis,” said Mike Southgate, Marine, Energy and Specialty Divisional Director for Hiscox London Market. “Smaller and mid-sized energy companies in particular – without the balance sheet strength of the energy majors – have recognised the expense of the traditional employment model and looked to hire expertise on a self-employed basis.”
Smaller and mid-sized energy companies in particular – without the balance sheet strength of the energy majors – have recognised the expense of the traditional employment model and looked to hire expertise on a self-employed basis.
In turn, this has created a small army of former oil and gas employees including roles like project managers, data analysts, safety training and well completion and workover consultants who now find the only way they can work in their chosen field is on a self-employed freelance basis; and that army is likely to get bigger. “COVID-19 has proven that people can work remotely who might formerly have been in an office. It will undoubtedly drive more energy businesses to make use of self-employed workers and reduce headcount where they can,” said Southgate.
A new offering for consultants
It’s why Hiscox has developed a new combined professional and general liability insurance e-trading product for oil and gas consultants in the US. “We’re working with specialty insurance broker Amwins to offer a new product to self-employed energy consultants offering non-manual work within the sector. Delivering the product through an electronic trading platform with real-time quoting, it’s been designed to make the user journey as smooth and efficient as possible,” said Southgate, who added that providing this cover from London can offer real advantages, particularly when it comes to its favourable claims record. “We’ve got a great claims team in place and are confident this will give us a real edge over domestic US insurers offering this cover.”
This is just one area where improving access to liability cover will help oil and gas businesses maintain the safety and efficiency of their operations, while supporting the changing needs of the sector’s workforce.
Shawn Fabors, Managing Director of Amwins Program Underwriters adds “We are excited to partner with an industry leader to offer a competitive insurance solution for oil & gas consultants. The electronic trading platform will allow our expert oil & gas underwriters to deliver real-time quotes to over 25,000 retail relationships. This streamlined process can quickly introduce and distribute the product, allowing us to hit the ground running.”
In a changing market, the insurance industry must adapt to the changing needs of its clients concluded Southgate. “This is just one area where improving access to liability cover will help oil and gas businesses maintain the safety and efficiency of their operations, while supporting the changing needs of the sector’s workforce.”