Core Competencies of P2P Insurance

Advancements in technology have collided with longstanding customer issues to build a series of deep, long-lasting, systematic challenges for insurance. One of the oldest and most conventional sectors of the market had witnessed minimal disruptions, but the rise of fintech, changing behaviors of customers, and cutting edge technologies are disrupting the insurance industry. Moreover, Insurtechs and technology startups continue to redesign customer experience with the help of various innovations such as on-the-spot purchasing, risk-free underwriting, activation, and claims processing.

P2P model in insurance
Many businesses today are trying to adopt the P2P model, but Germany-based Friendsurance was the first to implement this model in the insurance industry. They began their operations back in the year 2010.

P2P insurance was drawn as a tool to solve two major sales barriers of the insurance industry that are, high premiums and lack of transparency. P2P insurance allows you to select your insurance pool with friends, members of your family or simply anyone with whom you share interests and activities. In the scenario of no claim for a certain period, a portion of their money is returned to the members of the pool. In the case of larger claims that amount to more than the pooled amount, the insurance company settles it. According to Friendsurance nearly 80% of its clients received some money back from their paid premiums. fintech

Now let’s have a look at some of the core competencies of P2P insurance

It’s still growing
P2P insurance is very new and is still growing, so the providers and area of coverage are very limited. Various startups are trying very hard to increase their reach and also their coverages.

With the P2P model, the companies utilize social technologies to bring together a circle join together and pool their money in the form of premiums. A pool is then developed and can be tapped into if anyone in a circle where to file a claim and also entire pool of clients can benefit if claims fall short of the revenue in premiums.

Successful in various countries
P2P model came into existence hardly a decade back but it is relatively new to the United States, similar P2P insurance models have emerged in various other countries such as Germany, where it first started (Friendsurance), the U.K. (Guevara) and China (TongJuBao), according to the National Association of Insurance Commissioners, who are monitoring the emergence of P2P very closely.

Digital & Fast
Even in cities like New York where companies like Lemonade are there who have enhanced the speed and ease by which residents of New York-area can get renters and homeowners insurance for the home they own or the possessions in their rental apartment.Payments

Even in New York that has a metropolitan population of more than 15M, it is difficult to even get an online quote for insurance. Generally, you need to call an agent and give them your details over the call and wait for the quote. P2P insurance companies have made this process easier where u can use mobile apps or go to their website and do everything you need.

Proceeds are shared
With P2P insurance, if no one from the ‘social pool’ files a claim, part of the money paid, is returned to them as a dividend. This model hence builds trust and transparency between the insurer and insured, making the insured stay with the firm and continue paying further premiums.

Traditionally insurers use to keep the unused premium funds as their profit, but P2P insurance has changed this belief of the insurers which has given confidence to the clients and generated trust towards the insurance companies.

Blockchain could enable P2P insurance
There are numerous examples of how blockchain could affect the banking industry, particularly security and commodity trading and payments services. In the insurance industry, it is the IoT, big data, and crowdfunding that are widely described.

Maybe because of this, the effect of blockchain on the insurance industry hasn’t been a strong point of focus for innovators. Some papers, such as the Ethereum white paper and “Chain of a lifetime” do portray examples of new products that could result from blockchain technology.

Smart contracts could be the empowering influence for a P2P or crowdfunded insurance model. Other than the administration done in a decentralized ledger, with the utilization of smart contracts, one could ensure the payment from the investor to the client in case the event for which the client posted their insurance demand happens. The smart contract is thus programmed as a traditional guarantee, but without the requirement for a bank.

By doing this in a blockchain, the administration and execution processes are less difficult, transparent, cheaper than in a traditional setup, and completely automated. Other than that, the investors know their maximum exposure as the amount defined in the smart contract.