RiskGenius Blog

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Welcome to the Peer to Peer Risk Sharing Revolution?


It seems like lately every industry is getting hit with alternatives to the old ways of doing business. From Uber to AirBnb, peer to peer sharing platforms are taking over and disrupting old business models.So it's no wonder someone is trying to apply a peer to peer sharing platform to the $1.7 trillion industry. Peer-to-Peer (P2P) insurance is spreading through Europe and about to make its debut here in the U.S. This article will break down and explain what P2P insurance is, introduce you to Friendsurance, a German P2P insurance company, and Lemonade, a U.S. based company looking to disrupt the insurance industry.


What is P2P insurance?

Peer to Peer insurance, also known as sharing insurance, groups individuals together to minimize risk. This differs from the traditional way of pooling everyone together no matter his or her health or risk. Coverage groups can be made with friends or strangers with similar policy risk. The money combined by those groups is then used to pay claims throughout the year. If no claims are filed or only a small amount is used then that money is paid back to the group at the end of the year.


Grouping with people who are low risk is the best way to ensure you get some of your money back at the end of the year. Another way to give yourself the best chance at a refund is by keeping your group small to minize risks. Consumers may find peer to peer refunds appealing, which don't exist in the traditional insurance business model. P2P insurance helps individuals who are high-risk as well because they can be influenced to drive safer through peer pressure by their group. They can also be grouped with other high-risk strangers to ensure they are covered in some way.


Who is doing it now?

The best way to explain this new sharing economy is to look at an example.


Friendsurance, founded by Tim Kunde, Sebastin Herfurth and Janice Meyer-Plath, is a P2P insurance risk sharing German company that acts as an independent broker for insurance carriers. Looking at Friendsurance’s webpage, you are greeted with a team picture and quick description of what this company is all about. The company’s about page states that:


“Friendsurance has developed a revolutionary peer-to-peer insurance concept, which rewards small groups of users with a cash-back bonus at the end of each year they remain claimless.”


This platform benefits both the users and insurance carriers. The users get cash-back rewards if they stay claimless at the end of the year. The insurance carriers gain customer loyalty and increase satisfaction from the Friendsurance model. As well as a decrease in fraudulent and inflated claims people make since they would be taking out of a pool that could reduce their premiums for the following year. For smaller claims each member would be able to take money from the network they had created without having to file a small claim with the insurance company. The Friendsurance website boasts that their claim frequency is below the market average.


Friendsurance started with one category of insurance but now has four different categories and plans to move into more categories as they gain momentum and a larger customer base.


Check out Quevara and Bought by Many, U.K. based companies, for other examples of this P2P economy changing the insurance world.


Who is trying to do it in the US?

Lemonade, based out of New York City, is a new company looking to bring P2P insurance to the U.S. The company was founded by Daniel Schreiber and Shai Wininger. Schreiber was the previous President of Powermat (portable wireless charging solution) and Wininger cofounded Fiverr.com (online marketplace for freelancers). The founders have yet to elaborate on the business model of their company but promise to change the “lemon” experience of buying car insurance into “lemonade”.


In 2015 they raised $13 million in seed funding from Sequoia investors.  Lemonade has also acquired the expertise of many high-powered executives from various insurance firms. These executives will bring their knowledge and years of experience in the traditional insurance industry to the new start-up in hopes that they can revolutionize the static industry.


Currently, Lemonade is working hard with New York regulators to ensure they comply with all U.S. regulations. They are looking to avoid the lawsuits that P2P platforms like Uber have had to deal with.


It is time U.S. consumers have a P2P insurance option and Lemonade is making it a reality.