At a recent social event, a GP physician asked me what business I was in. When I told him insurance and technology, his eyes widened and he asked an unexpected question: “What do you know about peer-to-peer insurance?” I told him it was becoming a hot topic in my world, and he surprised me again, saying, “In mine, too.” There are lessons here.
It’s peer pressure….
Peer-to-Peer (P2P) insurance is getting increased attention since 2010 when Friendsurance, a Berlin based Fintech company was chartered with the objective of allowing small groups of people with similar insurance, to have a portion of their premium to be paid into a ‘cashback pool.’
This pool is used to pay for smaller claims. At the end of the year, the balance of the pool is distributed equally to each of the group members.
Friendsurance’s role is to act as a broker to organize primary and stop-loss covereages, utilizing some 60 insurers, and to maintain the individual and group accounts. The company’s platform helps customers find others in a social media setting to create the connections required.
For 2013 and 2014, the Freindsurance web site claims: “80% of the customers who took advantage of our claims-free bonus received some of their premiums back. In the property insurance line the average cashback was 33% of the paid premiums.” [emphasis in original]
Have we heard this one before?
By this point, even the most casual student of insurance will be reflecting back on a 17th century coffee house in London, where Edward Lloyd served drinks while shipping magnates pooled risks of trade with the new world. A model which continues successfully to this day
In addition,P2P looks much like mutual insurers. So what’s new?
Simply this: P2P is using technology and marketing to intentionally and seriously disrupt the prevailing insurance models. More on the technology in a forthcoming post. Let’s look at the customer side. Here are a couple of other P2P examples.
Peers are lining up
In France, Inspeer opened its doors in February 2015 with a model similar to Friendsurance. In an interview published on the BlueDun site, founder Louis de Broglie said “Because we are in the market from the angle of the deductible, the insurance companies have been very interested. It fits with their current models.”
In the UK, Guevara, which focuses on auto insurance, allows users to join private groups or enter ‘public groups’. In addition, the premiums paid are held and if there is a surplus for the individual, it is used to lower the individual’s premium in the subsequent period.
What’s the attraction?
Besides the promise of lower premiums, there seems to be another factor at play: This isn’t really the bad old insurance that we love to hate.
In her P2P insurance post in the digital business website, intelligentHQ, Paula Newton writes,
In general people tend to be quite skeptical about the insurance industry … What if insurance could be social, fair and reasonable? Peer to peer insurance is a brand new approach to insurance that has been growing in the last few years.
In the BluDun interview, de Broglie agreed that the basic model for InsPeer was the mutual insurance company, with one important difference: “mutual companies are so big that you don’t feel a sense of community. The idea is to use technology to help you leverage your local community – with all its positive aspects.”
We don’t have to fly to the UK or France to see this in action.
Erie Mutual: We have met the enemy, and he was us
Earlier this year, Erie Mutual Insurance Company was a recognized as a finalist in the 2015 Insurance-Canada.ca Technology Awards for a innovative program it undertook, driven by sophisticated analytics provided by Environics Analytics.
This relatively small (3,300 policy holders) 150 year old organization found itself without a “good grasp of our customers and prospects,” according to its president and CEO John Dutton.
The program focused on customer segmentation and resulted in a targeted marketing campaign which produced a 40% increase in new business revenue, twice that of previous years. Erie now has a greater digital presence, and is attracting a younger demographic. Their ‘likes’ on Facebook are trending in the right direction.
Are we ready for customers as peers
Here’s the lesson I’m getting from this: the good doctor I cited at the beginning of this screed was as interested in becoming part of the process as anything else. He wanted to be a peer.
Would you like to have him in that role?