P2P Insurance

Description

1.

"It was only a matter of time, that the p2p concept would be applied zo the insurance sector. Friendsurance does just that. You invite your friends and relatives, and they agree to cover part of the damage. In exchange Friedsurance claims that you can save up to 50-70% of the insurance costs.

At the moment Friendsurance offers general liability insurance, household contents insurance, legal expenses insurance and and cycle insurance.

How does this p2p insurance work?

Each of the invited friends will have to contribute 20 EUR in case an insured damage occurs. The remainder of the damage amount is covered by a conventional insurance.

Friendsurance says the costs savings are substantial since the concept:

   * prevents fraud
   * prevents misconduct (through social control)
   * eliminates sales costs
   * discourages claims for small damages
   * lowers administration costs"

(http://www.wiseclerk.com/group-news/countries/germany-friendsurance-first-p2p-insurance-concept-launched/)

2.

"Isn't an insurance essentially a social network to share risk?

This is the question that got Tim Kunde, an entrepreneur based in Berlin, to launch Friendsurance, a website that is now considered the pioneer of what one day may be called “social” or “person-to-person” (p2p) insurance. The idea is to more efficiently replicate for a group of friends what traditional insurance companies do for a large number of strangers.

Friendsurance offers household, personal-liability and legal-expenses insurance. Large claims are still covered by normal insurers, with whom the firm has partnerships. But the costs of smaller claims, which would normally be paid by a policyholder as part of a “deductible” amount, are shared within a small circle of friends, who can either sign up as a group or hook up on the site. Part of their premiums are set aside to settle these small claims. If something is left over at the end of the year, each friend gets back his share. “We are essentially insuring the deductible,” says Mr Kunde.

Take personal-liability insurance, a must-have for most Germans, who are among the world's best-insured people with an average of more than five policies each. German students pay around €55 ($71) annually to insure damages up to €10m. If five friends band together and none makes a claim, they will get about €24 back at the end of the year (the rest is kept to fund larger claims). Even with several small claims, there will probably be some cash returned.

There should be benefits for Friendsurance and its partners, too. “Insuring in self-selecting groups can improve the quality of the risk,” says Dave Aron of Gartner, a consultancy. Friends tend to be more honest with each other, which makes fraud more unlikely. They are also less likely to put in for very small claims—a broken teapot, say—which generate a lot of costs for traditional insurers. And social insurance is viral: customers have an interest to spread the word and get other friends to join in." (http://www.economist.com/blogs/schumpeter/2012/06/peer-peer-insurance)