The Peer-to-Peer Revolution Comes to Car Insurance

By AltFi on Wednesday 2 July 2014

Alternative Lending

The disruptive touch of peer-to-peer is now creeping into the world of car insurance, spearheaded by the colourfully named platform “Guevara”.

The pioneering platform will pool motorists’ premiums so that any unused cash at the end of a year will go towards driving down renewals in the following year. Any accident claims will be taken out of the collective pot of cash. This means that the safer the group of peers, the lower the premiums are likely to be year-on-year. Premiums will be competitive from the offset – but, providing there aren’t too many accidents within a given pool, the drop off in year two will be significant. Guevara claims to be able to save motorists up to 80% in successive years. A cap on premiums ensures that – even in the case of multiple crashes and scrapes – users never pay more than they did in year 1 (unless their circumstances change).

Ralph Hazell of Microexchanges – who penned an insightful guest column for AltFi on this subject a few months back– commented:

"This is exactly the sort of innovation that will shake up the Insurance industry. I have spoken to many people who have thought about putting money aside in a pot as a form of self-insurance, rather than buying a traditional insurance policy. I envisage a lot more companies like HeyGuevara to launch over the coming months and years, offering similar products for different market segments in the Insurance sector."

In terms of selecting a pool – there are two methods available. Users can either be invited by a friend of family member, or the platform will suggest the best fit for newcomers. Individuals deemed to be higher risk will pay a proportionately higher amount as a joining premium. Those considered too high risk altogether could be silently ejected from a group by vote – and Guevara will then assign them to a new pool.

The launch of Guevara has been diligently planned over the past 18 months. The platform is fully compliant with FCA rules, and could cause quite the stir within an industry that is ripe for disruption. 

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