EXAMPLES OF PEER-TO-PEER INSURANCE PLATFORMS

THERE has been some difficulty in applying a peer-to-peer model to insurance, Daniel Breier and Kelcey Smith say, because insurance is largely about covering infrequent but large, unexpected losses, which require a large institutional balance sheet. But various models have sprung up, with differing levels of institutional involvement. Three examples are:

• Teambrella, a Russian website, offers a simple stokvel-type, unregulated risk-sharing arrangement. Participants of a group donate to a Bitcoin wallet, and claims can be paid only with the consent of the group. Each group on the app has its own rules regarding the payment of claims.

• Friendsurance, a hybrid model that originated in Berlin, requires individuals within a group to pay a regular premium. The premium is split: a portion goes to buy traditional insurance and a portion goes into a savings, or Cashback, pool. Small claims are paid from the Cashback pool, whereas larger ones are covered by the traditional insurer. Anything left in the Cashback pool at the end of the year goes back to the group members.

• Lemonade, based in New York, is built more on the traditional model and attempts to modify the behaviour of its users in order to lower claim payouts. People signing up pay 20% of their premium to Lemonade, 40% to a reinsurance company and 40% into a give-back pool. Instead of policyholders receiving surplus cash from the give-back pool, the money goes to a nominated charity or cause. The theory, backed by behavioural economist Dan Ariely, is that, because a charity is benefiting, there is no incentive for a user to cheat the system.