FINTECH: Two P2P Insurance start-ups to follow in 2017
Definition: Peer-to-Peer (P2P) insurance is a risk sharing network where a group of individuals pool their premiums together to insure against a risk.
Lemonade is an insurance start-up powered by artificial intelligence and behavioural economics. According to their website, Lemonade takes a fixed fee out of the monthly premiums to pay reinsurance (and some unavoidable expenses) and use the rest for paying out claims. “Giveback” is a unique feature of Lemonade, where each year leftover money is donated to causes our policyholders care about. Lemonade uses the premiums collected from each peer group to pay for the group's claims, giving back any leftover money to their common cause, and uses reinsurance to cover for cases where the group's claims exceed what's left in the pool.
Lemonade launched their first product in September this year in New York. In a move to boost transparency, Shai Wininger, co-founder of the business, posted a host of statistics from the firm which boasted the company was able to post gross written premiums (GWP) of nearly $20,000 in its first two days.
Although it is only currently available in one New York State thus far, Lemonade was able to post a GWP that quadrupled their “most optimistic bet”, Wininger said, as the business was able to sell 142 policies.
The website homepage was visited more than 36,000 times and proved to be most popular with 25- to 34-year-olds, with under-35s making up over 50% of total visitors. More interestingly, Lemonade was able to poach customers from a handful of incumbents with 22% taken from industry giant State Farm, 18% from AllState and 14% from Berkshire Hathaway owned GEICO.
Most recently, Lemonade has closed a $34 million funding round, bringing its total funding to $60 million.
Why I find this startup interesting: Lemonade has been getting A LOT of press and I am curious to see if they really deliver. Their preliminary numbers look very promising and their “vow to be transparent” will make it a easy startup to analyse (if they actually remain transparent. Moreover, I love how they are taking a social stance, with their Giveback scheme.
Friendsurance is a German equivalent of Lemonade. Friendsurance pools its users into small groups and gives its customers a cash-back bonus at the end of each year they remain claimless for retail products including private liability, home contents, and legal expenses insurance. The peer-to-peer insurance solution uses social networks, such as Facebook, to bring customers together with the business, and is listed as an independent insurance broker in Germany, boasting 75,000 new customers on its platform in 2015.
They launched in Australia in October 2016 following a funding boost from venture capital firm Ellerston Ventures. Perry Abbott, Friendsurance Australia CEO and managing director, said: “The timing is right for Friendsurance in Australia because Australian customers are looking for new and different options in the insurance space.”
Abbott said the Berlin-based disruptor is looking forward to bringing to Australian customers the average33% annual claims reward in property lines enjoyed by their German customers.
Friendsurance is set to launch its first product in early 2017.
Why I find this startup interesting: The great thing about this startup is that is in Australia! Being in Sydney, I am keen to see how the Austalian market reacts to P2P insurance. I feel that the Australian market is quite different to other countries, so it will be interesting to see if Aussies adopt Friendsurance.