In a two-part research note, I review the current crop of InsurTech startups in Peer-to-Peer Insurance. Part 1 positions P2P Insurance, the protagonists and reviews an alternative approach to protection insurance in China. Part 2 looks at the role of P2P Insurance in addressing moral hazard and features Guevara, the UK motor P2P insurer.
Before the advent of underwriting in London’s coffee houses in the 1600’s, civilizations used various mechanisms to provide financial protection within their communities. For example, in the middle ages, tradesmen learnt their skills through apprenticeships in the guild system. These guilds collected fees and the wealthier guilds would use these fees as a kind of insurance safety net.
If a member was robbed or their house burnt down or they were to die, the guild would use money from the safety net to rebuild the house, support the family or settle any financial obligations.
The world of insurance has changed a lot since those times, but the fundamental definition of insurance as, “the mutuality in the sharing of losses”, hasn’t.
Which brings us to emergence of the new generation of P2P Insurance firms. These are InsurTech startups that want to change the relationship between the insured and insurer. They want to address the conflict dynamic that exists between both parties because the Insurer is betting on the Insured not making a claim. And the Insured is betting that they will.
The P2P InsurTechs also want to address human behavior and the moral hazard (see part 2 on this subject tomorrow).
Over the next two days, I will publish a two part research note that explains P2P insurance, identifies the P2P InsurTechs in play today and illustrates two very different business models through interviews with Founders.
P2P Insurance protagonists around the world
Friendsurance – Germany
The pioneer of P2P insurance from 2010, Friendsurance pools its users into small groups and gives its customers a cash-back bonus at the end of each year if they remain claimless. Friendsurance operates as an independent broker in Germany. See here for an interview with CEO and Founder, Tim Kunde.
Lemonade – US
Claiming to be the “world’s first P2P insurance carrier”, little is know about Lemonade other than “it is coming soon”. They hit the press two weeks ago when it was reported they had raised a massive $13m in seed funding (a strong indication where the puck is heading!).
Inspeer – France
Customers form friends and family groups to share the deductible (aka excess) element of a claim. This enables high deductibles, thereby reducing premiums from the insurance carrier. The group shares the benefit of lower premiums and provides each other with financial cover for the higher deductible if there is a claim.
PeerCover – New Zealand
This is a friend and family savings scheme to provide financial cover for d
via dailyfintech.com