A new peer-to-peer insurance company, PeerCover, has launched in New Zealand.
The platform allows customers to cover excesses across a range of products in general, health and some life insurance products from different insurance providers. The idea behind the platform is that you still take out your normal insurance cover but the peer-to-peer insurance helps cover any excess on that policy. This means that you can take out an insurance policy with lower premiums but a higher excess.
Chris Logan, Founder of the PeerCover platform, commented:
“I think one of the main things is there’s greater fairness and transparency. By moving away from the strict peril definition and the terms and conditions there’s potential for fairer outcomes.”
The PeerCover concept is simple. A group of about 4-10 friends or family members signing up to a group, called a PeerGroup. The site allows people to withdraw their money at any time and if the PeerGroup has made more than one claim, the amount you can take out is reduced proportionally. If the group has made no claims you get the deposit back. Money is only paid out of the PeerGroup to a member if the whole group agrees to it – a policy designed to reduce fraudulent insurance claims.
“What I really like about that is, if that’s the case and the claim wasn’t paid by the insurer because it didn’t meet the terms or whatever, if the peer group said they thought it was a valid claim that provides evidence for the customer to go back to the insurer and say ‘my whole peer group thinks it’s a valid claim so you may need to reconsider.’ I feel it empowers the customers.”
PeerCover charges $100 in a claim fee and the platform is not isn’t covered by reinsurers. The platform is not regulated as it falls between the cracks of regulation covering the financial sector. It isn’t covered by P2P lending regulation and so isn’t covered by the Financial Markets Authority (FMA). It also doesn’t classify as insurance so isn’t regulated by the Reserve Bank.
There have been surprisingly few P2P forays into the insurance sector. In the UK there is a platform that focuses on car insurance called Guevara. The platform pools motorists’ premiums so that any unused cash at the end of the year will go towards driving down renewals in the following year. Any accident claims will be taken out of the collective pot of cash. Meaning that the safer the group of peers, the lower the premiums are likely to be year-on-year. This gives an incentive for people to reduce claims, especially if the ‘group’ is made up of their friends or family members. Brought By Many is another UK site that allows people to join groups for specific needs you have, for example finding pet insurance for a Labrador, the site then negotiates insurance deals with insurance companies for that group using the power of the numbers in the group to negotiate a better deal for members.
These P2P insurance platforms offer an alternative to self-insurance and could even bring those currently not insured into the market. Logan has lofty aims for the platform:
“I think generally people in New Zealand are more willing to consider new ideas and are less conservative, and if it goes well in New Zealand then of course I’d consider applying it to the Australian market and beyond.”