Examining The Investment Potential Of Peer-to-Peer Insurers
Tony Ca?as, CPCU, MBA, AU, ARM, ARe, AIC, AIS
Insurance and Insurtech Talent Matchmaker | P&C Insurance Nerd | Best Selling Author | Speaker | 28k+
This article by Nick Lamparelli originally published on InsNerds.com
Recently, I wrote an article at InsNerds.com where I outlined a simple modeling framework I use when I try to predict how a new insurance product or new insurtech startup is likely to perform. In this article, I will walk through an example to give you a play-by-play on how to put this simple mental model into exercise.
Can Peer-To-Peer Insurance Succeed?
Peer-to-peer business models really came into their own in the financial arena, where companies such as Prosper and Lending Club were able to create platforms that allowed individuals to loan funds directly to one another. As a Prosper investor, I still recall how neat it was that I could loan a family $25 and be part of a pool of like-minded people who were looking to help others and make a little bit more money than a bank account. (disclaimer: you can lose your money too. I have had several borrowers default, and you will need to make up for it on those accounts that don't default).
Investors, always a group looking for the next big unicorn, have applied principles of P2P to others businesses as well, such as car sharing and file sharing. Even digital currencies such as Bitcoin are P2P based. Not surprisingly, investors and entrepreneurs are looking into whether P2P would work well in the seemingly tattered insurance industry. Companies such as Lemonade, Guevara, and Friendsurance are already selling policies and making a name for themselves and also getting a lot of investor attention. InsNerds.com was very lucky to have Dylan Bourguignon of So-sure insurance, a complete P2P insurer write an article for us on the topic (be sure to read this article if you want a breakdown from the point of view of an insurer).
Let’s walk P2P insurance through the model framework and see what all stakeholders need to see.
Founder and CEO, ALEX.fyi and ALEXIncome || Board Director, Genworth Financial || Former Managing Director, Goldman Sachs
7 年Best and most objective review that I have seen of Lemonade--thoughtful and balanced. I have been struck by the rather emotional response to Lemonade from some insurance traditionalists. My view on Lemonade is simple: I don't know yet if they have the right answers, only time will tell. I do believe that they are definitely asking the right questions. Like you, I hope that they are successful. Whatever validated learning is gleaned from this remarkable experiment will benefit the whole industry.
Facilitating Innovation In Healthcare Policy
8 年Great article! I think the potential for P2P to be huge is still there, but all the stars need to align. Providing stellar customer service through automated claims and an ability to sign up without an agent is appealing to digital natives. The hiccup in my opinion and where I agree with the author is in shifting from niche coverages to policies for the masses. If Lemonade could expand to include full auto coverage and be a true direct competitor to incumbents it would have the potential to really shake things up and scale. Having said that, Lemonade isn't P2P. I agree, I don't think the charity angle is enough to prevent fraud. However, I do believe it's only a matter of time before the stars align and someone gets it right and addresses most if not all of the concerns laid out in this article. The establishment should be looking for ways to beat them to the punch.