The concept of peer-to-peer insurance is very close to the concept of mutual aid for which all the insurances have been founded, so it is a far-off model. However, today’s technology platforms have offered a tool to create networks, make financial transactions, simplify and streamline processes, with obvious benefits in terms of cost reduction. The peer-to-peer policy, enabled by digital technology, makes it possible to return to the origins, in some cases taking radical forms, ie replacing (and threatening) traditional companies, in other cases, collaborating with traditional companies and becoming a sort of broker.
The feature shared by all insurance P2P platforms is a good way to help people to be “covered” against the risks of daily routine, with no misuse, eliminating the lack of transparency customers complain about, especially in “reimbursement” zone; Eliminating that antagonistic attitude that leads the insured to consider the carrier as a potential enemy rather than an ally, often generating fraudulent behavior.
P2P reestablishes the relationship of trust with the creation of pools or groups that together create the solidarity fund: if none of the people in the “social pool” file a claim, part of the money is returned to them as a dividend. This model restores confidence and transparency between insurer and insured, making fraud unnecessary and self-defeating and compensation unquestionable.
The first peer-to-peer insurtech startups are European: Friendsurance (D), Guevara (UK), Inspeer (FR). followed by the Chinese TongJuBao and Lemonade, in New York.
Each one has created its own P2P model.
Friendsurance, founded in Berlin in 2011, has globally raised over $ 15 million in venture capital investments. Among its investors one of the wealthiest Asian men, Li Ka-shing and venture capital funds VantageFund, German Startups Group, e.ventures.
Friendurance is a sort of Insurance Groupon, an advanced broker. In addition, it allows people using their platform to register and create an online group of users using the same insurance product, paying a premium that includes a part intended for standard insurance (provided by third parties), and a stake that will be paid in the group account. To cover minor damages, the joint account is used, while the most important indemnities will be covered by traditional insurance providers. At year end, all the money in the joint account that have not been used, are redistributed to users in the group or reinvested in the fund renewal. If the joint account goes blank or is not enough to cover compensation, another insurance will cover the loss. The biggest benefits are obtained with large groups and a low number of indemnities. In a nutshell, the company says, if during the year no compensation is paid, a maximum of 40% of the initial investment is repaid.
The purpose is to reduce the cost of insurance, sharing financial responsibility and cost of claims.
Inspeer is a French startup officially born in February 2015 (it is actually the first French insurance startup to have chosen this model), which has devised a very special policy. Inspeer’s innovation and originality is to have seen a business opportunity and a response to a user’s demand in a “twilight zone” of the insurance market: the excess (or deductible).
All car, motorcycle and home insurance generally have a deductible, that is, the fixed and predetermined amount that is usually borne by the insured or that the insured agrees to pay to the insurer after the latter has repaid the damage. In the most common policies there is a partial deductible: no compensation is paid under certain value, but – if it is exceeded – the indemnity is full.
Inspector has split the deductible: through the platform, people sign up for service by creating their own circle of reference people, inviting friends and relatives to join the “solidarity” group, being mutually committed, if necessary, to cover the amount corresponding to the deductible.
It’s all online, and Inspeer retains 10% of the transactions, but only if the compensation actually takes place. Each user can participate in different groups, taking into account the maximum exposure limit of € 100 per group and € 1500 on the entire platform.
Guevara sells its own policies; saves is the result of groups created through this digital platform to pool resources: subscribing to Guevara, a fixed portion is considered as fee for the group, while another party is transferred to a joint fund to cover the damages. The fund’s annual exceeds are reused as a basis for lowering the group’s premium the following year. Basically, in an ideal situation, with no claims or nearly so, the policy would be supported by itself over time.
TongJuBao, like Guevara and Lemonade, wants to completely redefine the end-to-end insurance model. Not a dealer for traditional companies but the new insurer.
With TongJuBao, there is no underlying insurance carrier. Their model (rather complex, on this page more info) is very similar to Guevara’s. It is based on the creation of social communities or groups of customers who join as members, paying two amounts of money on their deposit account. The first is the administration fee, the latter is actually a guarantee deposit to cover the insured risk. The risk is shared on the group. One of the company’s features is the type of risk it has chosen to insure: the success of a marriage, the costs associated with the disappearance of children, divorce, job position, things that no one else would.
The company closed a joint venture to enter the US market as well.
Lemonade is a New York startup getting more and more famous. Prior to joining the market, it had already received investments of about $ 26 million, $ 13 million received by Sequoia Capital, a leading venture capital fund in the US, which has achieved the most generous seed investment ever known. It has recently closed a new $ 34 million investment round, sponsored by GV (Google Ventures) and General Catalyst. This peer-to-peer insurance company has already collected a total of $ 60 million in one year.
Lemonade was also impressive for several achievements in its first year of life: Is probably the most advanced P2P insurance model, has built a customer experience that leverages on the most advanced technology frontiers of machine learning and chatbot, is the first insurance company in the world to have obtained the certification of Benefit Corporation. Here below, Lemonade graphically summarizes its P2P.
The startup has an exceptional customer experience that in a couple of minutes allows you to enter into a policy, avoid any potential conflict between insurance and customer, simplify the red-tape (recently stated to close claims in only three seconds), reduce costs; Lemonade also devotes some of its revenue to charity, highlighting its P2P nature: In fact, the application proposes the “GIVEBACK”: customers are invited to appoint a charity when purchasing a policy. Then, premiums of people who choose the same charity, are grouped together and form a single fund covering claims. By the end of the year, money unused for damages are donated by Lemonade to the charity or project chosen by a group, as better explained in this post.