Solidarity in insurance — P2P in action

30.04.2020

As the world starts to get slowly back to work, many workers are beginning to see the value of income protection. Last week Aleš Tomazin, Head of Business Development, presented our second webinar, which focused on the rise of peer-to-peer (or P2P) insurance. Thanks to all those who tuned in! If you didn’t manage to catch it, here’s what we discussed. First off, Aleš explained how Peer-to-peer works, just in case you’ve never heard the term.

What is Peer-to-peer insurance

A product that allows a group of insured individuals to pool their capital and self-administer their own insurance. There are a few different variations of how it works, but the core ideas of transparency and users having more control are constant. As is the end goal of reducing premiums.

How Peer-to-Peer insurance works

Traditional insurance caters to groups rather than individuals; income protection is a bonus that medium or large companies can offer as a benefit to employees. This approach freezes out freelancers and small businesses, which end up either overinsured, underinsured, or more commonly without insurance. Through joining a peer-to-peer insurance group such as with VouchForMe’s income protection, individuals can pool their resources and cover themselves in the case of accident or illness for up to two years. If nobody makes a claim, the money remains yours, and you stay in control of it.

Additionally, as the peer-to-peer group covers the first two years, group members can benefit from much lower premiums, should they require income protection for longer.

Next, Aleš looked at the differences between Peer-to-Peer and Traditional Insurance.

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The benefits of P2P

Aleš went on to describe some of the main benefits of the P2P model:

Lower Cost — As the group shares the risk rather than the individual, premiums are lower with P2P than they would be with an individual policy. By grouping, freelancers have more buying power, and insurance companies are more likely to offer customized plans.

Streamlined and fast — Insurance is traditionally bureaucratic and slow-moving, just the act of getting a quote can be a long process requiring dozens of questions on health and lifestyle. Anyone who’s filed a claim knows that getting a payout can be equally challenging, which adds unnecessary stress at a time when you should be focusing on recovering.

Digital — With start-ups and insurtech driving the move forward, Peer-to-peer tends to be more integrated with technology than traditional insurance. With Peer-to-peer, you can always see what’s in the pot, and reach your provider at the touch of a button. Much better than a long wait in a call center queue!

Challenges of Peer-to-Peer

New technology has its challenges, and Peer-to-peer is no exception. Aleš highlighted some of the barriers to P2P adoption.

Complexity — While both the P2P and traditional insurance models are both complex, most people at least are familiar with the conventional model. Some may be hesitant to move to a new platform. Gaining the trust of new customers and ensuring the model is understood will be a considerable challenge for P2P providers.

Large groups needed — For P2P to work, it needs to have a group of like-minded individuals, while P2P is largely unknown, it will be challenging to form big enough groups.

Trust — As trust is an essential part of the P2P model, Providers must ensure that it works as expected. Bad experiences will cause customers to revert to traditional insurance and make it harder to build groups.

Onboarding new customers and building trust will be a challenge. Still, as Aleš explains, once early adopters start to see the benefits of Peer-to-peer, new customers won’t be as hesitant, as has already happened in the Chinese market.

Social Proof as a Peer-to-peer concept

Social Proof a psychological phenomenon where people copy the actions of others in an attempt to undertake the correct behavior in a specific situation.

In simpler terms, social proof is how others’ behavior encourages you to evaluate and alter your own. Have you ever checked out a product review before making a purchase? Or read a review by a film critic? That’s social proof in action. Aleš covered the six types of social proof.

  • Expert
  • Celebrity
  • Users
  • Crowd wisdom
  • Friends
  • Certifications

VouchForMe uses social proof to monetize the trust between close friends and family. After all, who else knows you better. Aleš uses the following example; You might say you’re a healthy person because you’ve got a membership at a gym and work out sometimes, but if your friends see you drinking in the pub every evening and know that you only go to the gym for the sauna, they’ll know your gym membership is a joke. So would they act as a financial guarantor for you on a health insurance policy? Probably not.

VouchForMe’s car insurance uses peer-to-peer to build up guarantors to reduce car insurance premiums. Are you a good driver? Would your friends and family agree? If so, would they back you financially? If they would, you can get cheaper premiums, you’ll probably remember that trust each time you take your car out, which encourages you to be careful on the road. With VouchForMe, customers get cheaper insurance premiums, and insurers gain access to a broader group of customers, and society benefits from careful drivers on the road, it’s a win-win-win.

Coming Soon — Something new

We’re excited to announce that there is something new coming. Stay tuned to find out more!