Source: Peer-to-peer insurance on its way to market standard | Tim Kunde | Pulse | LinkedIn

The idea: fairer, more affordable insurance

For customers it’s frustrating to have to pay insurance premiums year after year, even when they don’t use them. That’s why we at Friendsurance have developed a peer-to-peer insurance model, which rewards being claimless with a yearly cashback bonus. It involves insured persons grouping together online. A part of each their insurance premiums flows into a cashback pool. If no claims are made during the course of the year, everybody gets a share back from the pool. Small claims are paid out of the pool. With larger claims, the classic insurance company jumps in to assist. If the pool is empty, a stop-loss insurance takes effect. This way, the insurance is assured in every case, without additional costs. Thus far over 80% of our users have received repayments – in the composite sector, around 30% of the paid premiums.

German start-up kicks off international trend

When we introduced the peer-to-peer model in 2010, we were the only provider in the market. As pioneers in the space, we had a lot of persuading to do. There is now a segment for peer-to-peer insurance (P2P) with 28 providers worldwide. The providers mainly differ according to four characteristics: 1) whether they act as brokers or insurance companies, 2) whether they connect individual peers directly or indirectly, 3) the insurance areas in which they are active, 4) whether they are still in the planning phase or have already launched. Probably the most important providers in terms of development and customer numbers are Friendsurance in Germany, Guevara in the UK, Inspeer in France and Lemonade in the US.

Business model with future potential

The fact that the international insurance market is seeing an increasing number of P2P providers, and that renowned investors such as Sequoia Capital and Horizons Ventures are investing millions, is encouraging for us that the P2P insurance sector will soon develop into a market standard and change the nature of insurance. A recent study by the Digital Insurer of over 600 experts surveyed revealed 84% believe P2P insurance affects customers’ attitudes and behaviours regarding claims. They concluded that it incentivises fairer and more prudent behaviours, thereby reducing insurance fraud. It remains to be seen which individual providers can implement their model.

Consistent customer focus as success factor

Why do we expect our model will be successful? As a digital insurer, we want to make insurance companies more customer-friendly along the entire added value chain. We use P2P to create a financial benefit that is easy accessible. But that’s just the beginning of the story. We become your digital broker, we add a lot of service layers on top to make sure that your life gets more convenient, more transparent and that you have less hassle, dealing with these topics you would like to avoid. We have convinced over 100,000 customers already, and we have more and more insurance companies working with us. They benefit from increased customer satisfaction and customer loyalty, and at the same time, save on administrative costs for processing small damages.

Actually, we transform insurance from something which is good for a few people into something which is good for many people.

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