Often in life what is old will become new. As insurtech became a buzz word in the last decade we saw many old concepts become energized through new technology. Peer to peer insurance or P2P Insurance takes an old insurance concept and makes it new by using technology to collect and analyze data and communicate policyholder coverage.
Lloyds syndicate is often touted as the beginning of insurance but it is truly just the beginning of modern insurance companies not the beginning of insurance. Prior to that, mutual aid and beneficial societies all engaged in a concept that matches what is now modern day P2P minus the technology, underwriting and sometimes reinsurance. Simply put, individuals either pledged or paid into a pool to meet the loss needs of other members of the society.
Modern day P2P companies differ in many respects but generally collect premiums or collect contributions (post claim) in order to pay for claims of their fellow members. They also use technology to better understand and drill down on what a mutual and similar risk profile is. However, they may differ in their requirement of mutuality and opportunity for refunds during no claim years (i.e., Friendsurance), in whether they choose to cover only very specific limited items (i.e., Cycle Syndicate), and in how involved the peers are in determining the terms of coverage and accepting fellow members (Teambrella). Regardless of the specific details, the companies definitely decrease administrative costs, hope to decrease fraud, and provide greater claims satisfaction as there is less of the me versus the big insurance company feeling during a claims process.
The megalith insurance companies of this era provide expansive security to citizens but will often have a base level of premium they need to collect for risk due to shareholder obligations and administrative costs. This is why there was excitement around the P2P concept because they were hoping to prove that if you cut some of those aspects out, you could save citizens but also increase the customer experience of having insurance even if you never have claims.
I see future implications in how this model can be tweaked to meet the needs of microentrepreneurs and how this can be tweaked to allow for success for smaller affinity or captive programs of captives.
So, stay on the lookout for these types of iterations. If you are part of a business affinity group or trade association and are curious if this type of program can be set up for you organization, reach out to us as we can help.