The case for Peer-to-Peer insurance
From institutional privilege to anyone’s game
Kickstarter, Airbnb, Uber and RateSetter — they have one thing in common: their models require participation from consumers.
In each case they have used technology to redefine the barriers of the traditional “firm”, allowing consumers to participate in the production and distribution of goods and services. These brands are powering the emergence of a new social economy in which people participate rather than consume. Their customers expect to be involved in the “product” and to be rewarded for doing so. Their customers are the fastest growing segment in western markets.
P2P lending — A beachhead in Financial Services
Peer-to-Peer (P2P) lending uses the power of the internet to connect borrowers and investors directly, removing expensive banks and intermediaries. This means that through platforms such as RateSetter, businesses and consumers can ‘rely on each other‘ for lending and borrowing services, providing investors with attractive rates of return, and creditworthy borrowers with competitive access to finance.
In the UK, P2P lending has grown with government support and in 2015 over $2.6bn will be lent through such platforms.
The insurance opportunity
Digital platforms and social connectivity aim to offer coverage that is cheaper, more transparent, and more relevant to the customer. Within insurance there are three key opportunities:
- Reduce Customer Acquisition Costs; social insurance networks can offer the functionality for people to buy insurance with friends and family members, decreasing the cost of acquisition for the insurance provider.
- Reduce Exposure; platforms can create innovative new ways to pool and share risk to either reduce sum insured or to positively affect claims costs.
- Reduce Administration Costs; digital platforms can dramatically reduce customer service and claims handling costs through greater use of automation.
Disruption is coming to insurance
Innovative insurance models are emerging across the world, all using technology and social networks to create new value for consumers, while finding their place among traditional insurance models.
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