Who knows you best or why the science of social proofing works
“You are the average of the five people you spend the most time with,” says Jim Rohn. They can be your friends, your family, your spouse. It is you circle of trust.
These people, and it can be of course more or less than five, trust you with their life, give you their precious time and make you a better person. Whenever you need anything, they are the people who show up and help. They can help you with anything physical, or with a shoulder to cry on. They can listen to you and they can give you an advice. Above all, they give their word to you, that you can count on them.
People in you trust circle are like your insurance policy.
What about more practical, every day or even legal stuff? Can they lend you a car? Yes. Money? Also, sometimes yes. Can they give you a loan, like banks? Well, they can guarantee for you at your bank with their possessions that you will pay your dues. If you don’t, the debt transfers to them. Of course, this is a very simplified view.
What about insurance companies? Can your friends guarantee for you there?
Imagine your lifelong dream, maybe it’s riding a motorcycle. You go to school and apply for a license and then you finally buy it. To be on the safe side, you also buy an insurance policy. But, since you’re a starter driver, your policy is merciless and you pay quite a lot.
Wouldn’t it be great if someone you trust could help your premium be up to half cheaper? That way anyone who knows you are a safe driver could go to this insurance company and put their signature and money on your policy. In return, the premium is now up to half the price.
Now, imagine you’re in a bar with this friend after a few weeks as he started to drive his motorcycle. You both drink a couple of drinks and you’re ready to call a taxi. This friend says: “Oh no, it’s all right, I can still drive.” “What?!”, is your surprised reaction? “I guaranteed for you that you are a good driver and now you want to go out and drive drunk? Oh, no, you are not putting yourself and others in dangers. And consequentially, I put my word and money for you. If anything happens, you’ll break our trust and my money will be taken away because of your stupid mistake.”
Oh, but wait. The next day you make a scratch on your car completely by your fault. In the old days, you would probably claim it to an insurance company as a parking lot accident to collect money. We all do that, don´t we?
With InsurePal insurance, you are aware that this kind of deductible will be paid out by your social network and that just wouldn’t be fair. So, you rather think twice and change your behavior to be more responsible towards the friends who guaranteed for you.
Why is that so? Because the traditional model doesn`t build on your trust. You think of an insurance as a big company that doesn`t care for you and likewise, you don`t feel any responsibility or guilt when making a false claim. On the contrary, our social proof model challenges you to become more involved. Remember your friend from the bar? In that situation you were very much included in his driving actions and the possible consequences. Because of that you prevented a potential drunk driver to go on the road and just might saved lives. Thank you for your trust!
The above-mentioned scenarios are just some of the examples proving why social proof insurance can and will push the prices of premiums down:
- it’s cherry picking: people are willing to guarantee for their trusted contacts
- it involves money: the endorsers guarantee with their money, making them much more involved in the process and vice versa. The policyholders don`t want to burden their social network and think twice before making a bad decision.
- It rewards behavior that benefits us all: in fact, this peer-to-peer insurance model goes back to the roots of insurance, when smaller groups of people did mutual insurance to help each other out and when bad peers were automatically expelled or motivated to change for better. The principle stays the same, and it is reinforced with the power of blockchain innovation.
Social proofing can and will change the way we look at the insurance industry and on trust between people. Is it somehow different that the classical way of paying for an insurance? It is. Is it cheaper? Yes, it is. Does it have a positive effect on your way of living? Yes. Also, if we instill more trust in or blockchain business processes and transactions, we get a much more balanced ecosystem that is just ready to bloom. Classical insurance cannot do that because it is just too expensive. But, we can.
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