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Peer-to-Peer Insurance


Last Updated: 7/3/2024

Issue:  Peer-to-peer (P2P) insurance is a product that allows a group of insureds to pool their capital, self-organize, and self-administer their own insurance. The core idea of P2P is that a set of like-minded people with mutual interests group their insurance policies together introducing a sense of control, trust, and transparency while at the same time reducing costs. This model of insurance combines traditional pooling and sharing of losses with current technology and innovations, providing a product for increasingly savvy consumers who require transparency in an on-demand economy. 

The P2P insurance model usually consists of a small group of family members, friends, or individuals with common interests who combine their premiums to insure against risks. When a loss occurs, money from the pool is used to cover the individual. Because each insured is responsible for the entire group’s risk profile and refund, they are motivated to maintain low individual risk to keep costs low for all involved. 

While P2P insurance has garnered attention in the insurtech era, it is not an entirely novel concept. P2P represents as much a return to the old roots of insurance as a leap forward. Reflecting the very nature of the sharing economy, P2P insurance leverages the latest technological advances in social networking to best apply the model mutual insurance companies have basically used since the early days of insurance. To enable insurance to achieve its original mission, and do what it once did so well, the core idea and mission of P2P insurance is the betterment of the entire community with benefits accruing to all participating members. 

The model of P2P insurance can mitigate conflicts that may exist in the traditional centralized insurance structures between insurers and policyholders as their incentives do not always align. In traditional insurance, reserved premiums not paid out in claims are typically held by insurers. However, in P2P insurance—with members pooling their own resources to cover losses—residual funds (excess premiums) from the paid premiums return to the group when a smaller than anticipated number of claims are filed. In a year when losses from claims exceed collected premiums, coverage with a reinsurance company is in place to cover the difference. Since premiums not needed to pay claims are refunded to the member policyholders, conflicts between insureds and insurers tend to be minimized with P2P products. 

Lemonade was the first U.S.-based P2P company to officially announce plans to operate as an insurance carrier. Lemonade currently offers renters, condo and homeowners’ insurance in 26 states and Washington D.C. and is working to add additional states. While the P2P model may be relatively new to the U.S., P2P startups such as Friendsurance and Riovic, have emerged in other countries like Germany, New Zealand, the United Kingdom and France since 2010. 

P2P insurance products using blockchain technology have also emerged. This new P2P insurance model uses a digital wallet where every member puts in their premium in an escrow-type account to be used for claims payout rather than a traditional premium payment. In this model, none of the members carry an exposure greater than the amount they put into their digital wallets. If no claims are made all digital wallets keep their money. All payments in this model are done using bitcoin further reducing transaction costs. Teambrella claims to be the first P2P insurer using this model based on bitcoin. 


As emerging digital technologies alter the ways insurers engage with their customers’ new demands, preferences and behaviors, there may be alternatives to the 300-year-old traditional insurance structure of centralized risk-pooling. The NAIC continues to closely monitor new innovations in the insurance industry through the Innovation, Cybersecurity and Technology (H) Committee. The Committee provides a forum for discussion of innovation and technology developments in the insurance sector to provide resources and education for state insurance regulators on how these developments impact consumer protection and insurer and producer oversight. 


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