P2P Insurance Model: Start-up Mapping

Published in

Insurance 2030

5 min readDec 2, 2020

Insurance industry around the globe is facing similar challenges today that it faced decades ago as well. Customers or policyholders don’t trust their insurance companies. There is a clear conflict of interest that is in-built in the traditional insurance business model. Moreover, the basic premise on which an insurance product is built on is also something that is uneasy for most people, to park aside a certain sum of money which can only be used when a specific ‘negative event’ happens. If that event does not happen, the money is gone to the insurer’s income statement as profits.

It is due to these issues or reasons that has over the years made insurance into something that is not bought by the customers but is sold to them. We see policy agents, brokers, insurance salespeople calling and trying their best to sell a piece of insurance that would ‘help’ their customers in difficult times. All these demand side issues when combined with huge bureaucratic insurance companies with manual processes, outdated technologies, poor customer experiences, redundant processes add more problems for the prospects of the industry. This is evident with the insurance penetration levels around the globe, around 7.23% worldwide (2019).

This is how the premise is set for new insurtechs that use the Peer to Peer (P2P) Model for Insurance. The basic business model of a P2P Insurance Model is grouping the premiums of individuals from a group and returning the unused premiums after policy period end. P2P Insurance Model: An Introduction discusses in detail about this business model. In the second article of the P2P Insurance Model series, we would discuss the current state of startups in this space. We would try to distinguish the various startups based on two dimensions (D1: Type of Offering & D2: Differentiating Factor) and understand if there are some unique characteristics of successful and unsuccessful insurtechs in P2P Insurance space.

Mapping of Insurtechs

Insurtechs operating in the P2P space have differences in the way their business models are designed and, in the way, that their core competencies are based upon. These startups have similarities with a group of startups and differences with the others. A list of 40+ startups, from around the globe, has been created for this mapping exercise. Here, an attempt has been made to differentiate the startups into four groups along two dimensions:

Dimension 1: (Offering Type)

Here, the startups are differentiated based on their insurance offering type, i.e, if the company is an intermediary (being an agent/broker for insurance companies) or if the company sells insurance on its own (having its own insurance products).

Dimension 2: (Differentiating Factor)

Here, the startups are differentiated based on the fact if the differentiating factor for the startup is Technology based (proprietary technology/disruptive technology usage) or if the factor of differentiation is business model based (operating in a niche segment/disruptive insurance offering)

Below we present the view of the mapping of these insurtechs and try to explain the positioning of a few startups.

The Four Quadrants

This segmentation method divides the startups into four quadrants. Are there any similarities or trends within the quadrants? Which quadrant has a higher probability of success for a startup? More questions like these appear and this article will try to arrive at a coherent story from this segmentation.

(This positioning is based on author’s judgement about the startup and its business model and is subjective)

Firstly, we should understand the four quadrants.

1st Quadrant: Technology Based Intermediary

The startup works as an agent or a broker for existing insurance companies and try to offer these products in the form and design of a P2P type product. These utilize specialized technology (Blockchain or Artificial Intelligence/Machine Learning (AI/ML) based platform) that adds a differentiating factor to their arsenal. Friendsurance (Germany) that started as a P2P insurance provider has now transformed itself to a model where it also provides a digital bancassurance platform that digitizes the insurance services for banks and insurance companies. Pineapple (South Africa) is an agent for Compass Insurance and operates in the P2P space by providing products that are equipped with AI based image recognition and voice-based assistants in providing superior customer experience.

2nd Quadrant: Business Model Based Intermediary

Here also the startup is basically an intermediary for insurance companies but the unique and differentiating part for the startup is its business model and strategy instead of using a specialized technology. Bought by Many (United Kingdom) operates in the niche segment where it provides pet insurance products for its customers. They form groups of people together and then get discounted deals from insurers which acts as a win-win for both the policyholders and the insurers. They also offer customer experience enhancing First Vet video calls with veterinary doctors for their customers. Another niche insurance provider is Glow (United States) which provides products related to worker compensation and acts as an agent for insurance provider Chubb.

3rd Quadrant: Technology Based Insurance Provider

The startups that are mapped as insurance providers are those that design and create their own insurance products and utilize re-insurance services similarly to the insurance companies. In this quadrant the startups have a specialized or proprietary technology as a differentiating factor for them. Lemonade (United States) is a home insurance provider that uses AI based chatbots in customer interactions and has an AI/ML based anti-fraud algorithms to access and settle claims in seconds. Bandboo (Singapore) has created an Insurance Technology Platform where it crunched data to calculate the premiums that it will charge to the customers and uses blockchain based technology that also adds a degree of transparency in the process.

4th Quadrant: Business Model Based Insurance Provider

Like the 3rd quadrant here also the startup focuses on providing insurance products on its own but has a unique and differentiating business model. Inspool (United Kingdom) provides car insurance products to its customers and has setup a rewarding mechanism for rewarding (~75% savings) and promoting a safe driving culture. Vouch (United States) provides insurance services to startups and working with its clients to mitigate and manage their risks.

In short, this mapping of the insurtechs operating in the P2P Insurance space helps in dividing the companies based on their characteristics and business models. In a future article, we would like to discuss and compare the properties of the four quadrants and try to observe if there is a specific advantage for a company in a specific quadrant and attempt to find a good business model for a P2P Insurance company of the future.

References:

P2P Insurance Model: Start-up Mapping

Written by Hardik Gill