P2P Insurance is all about the customer
P2P Insurance as we define it today has evolved over the past 6 years. From the Friendsurance model of sharing risk with higher deductibles, to the Guevara model as a P2P carrier through to the soon-to-emerge, self-governing models.
But they all have one thing in common. It’s all about the customer.
The reason behind P2P insurance is quite fundamental. Today’s insurance business model has lost its way. The origins of insurance, way before the advent of commercial underwriting in the 17thCentury, are all based around the notion of a community. Whether these are social or commercial groups, the principles were the same.
Everyone pools together and collectively shares a loss in times of need.
However, with the commercialization of insurance, insurers have pursued a mass-market approach. Size (of the pool) is everything. But in doing so, the fundamental relationship has broken down because the original concept of insurance has gotten itself lost. It has become de-personalized and detached from those it is seeking to serve.
Now, with technology, affinity and community can be built on a mass scale. We’ve seen this with Facebook and Instagram. Both have fantastically massive scale and yet, every user feels personal and attached to their community of online friends.
This is the answer I give when people ask me, “Why now?” for P2P Insurance.
And then they say, “will P2P Insurance work?” My answer is always, “I wouldn’t bet against it!”
In my continued search for new P2P Insurance players, this week I talk to Versicherix, who are building Switzerland’s first P2P insurer.
Writing in an interview style is a departure from the usual format, but I thought I’d give it a go and see how it works. Hope you like it!
Rick: Hello Patrick, Reto. Can you tell the readers of InsurTech Weekly, why the market needs P2P insurance?
Patrick: We see P2P insurance as a revolution by customers. Insurance companies have not put the customer first and now, with P2P, there is a way for customers to get a better deal. VERSICHERIX will provide new ways of engaging with customers. Insurance will still be sold and not bought, but with P2P, the proposition for customers is better.
Rick: What impact do you think P2P insurance will have on the industry?
Patrick: Look at the growth of mobile payment systems. P2P insurance is at the same stage that mobile payment was at around 2010. We think P2P insurance will grow in the same way as this. And with more projects that are real peer-to-peer, the customer will start to love insurance. P2P will disrupt old insurers, we are sure of that!
Rick: What is the reason why customers will love the VERSICHERIX P2P insurance model?
Reto: The modern society demands new and innovative approaches. Today’s customers want individual insurance coverage on the spot and usage-driven. We want to give our customers an easy to use, customer centric way to get insurance. Today’s insurance client must pay for heavy overheads with their premium. Which is why we have moved away from the traditional insurance business. It is all about democratising the insurance business.
Rick: Can you help our readers understand how VERSICHERIX works?
Reto: First, we will release four products on the VERSICHERIX platform, leading to cheaper and a more customer centric insurance coverage. Ending up as one of the first real peer-2-peer insurance providers. Because the architecture of our technical platform is open, even more exciting products will follow.
Patrick: We will start with pooling to join forces for the best price performance ratio. Together the group gets the best coverage for an affordable price. We support this with customer service that provides a secure 24/7 insurance consultant video chat, telephone assistance, discussion boards and social media integration. In a second step our platform brings people with specific insurance needs together and offers this coverage request as a lead to insurance companies. These steps bring good traction to our platform. Step by step we will implement a full service P&C insurance carrier model. Policyholders form groups with their own fund for payment of damages. For excess claims, VERSICHERIX’s own insurance fund is called upon. It will be possible to hold shares of the VERSICHERIX fund by anyone, even the classic insurance industry can participate.
Reto: That is a good point of VERSICHERIX, we will build a platform, which can attract the customer and the traditional insurance industry. Fair and democratized. The industry will be disrupted by new models, but we love to work together with all stakeholders of insurance markets.
Rick: Reto, what is your opinion as Innovation Manager and CTO about the disrupting new business models in the insurance industry?
Reto: The old insurers’ advantages are capital and the trust of the brand. In my mind, old insurers’ disadvantages are the heavy structures and the culture inside of most insurers to hold onto tradition and habit. The new models like VERSICHERIX are very customer centric, flexible, on the spot and usage based, but all these new models have to build up the trust to the brand in the next few years. The intensifying competition requires the rethinking of traditional insurance models, starting with the customer experience. This drives a new requirement for a business model, and an operational & product platform to continue to meet the challenges and expectations of customers for products, prices and services.
Rick: Patrick, you worked for years as an Insurance General Agent and you own an insurance broker company. Is this sales model dead?
Patrick: No absolutely not. VERSICHERIX is improving the way customers help themselves online. Consumers are growing increasingly tech-savvy and most expect their favourite companies to embrace technology as well. Especially when it comes to customer service. But most of my clients offline with an insurance need want to save money and use a user friendly easy to use platform and live assistance, right when they need it. What insurance customers hate most, is a poorly trained, boring insurance agent in his first years of an insurance company, commission-driven at their homes in a moment, where they prefer to play soccer with their daughter.
Rick: Have VERSICHERIX gone out for investment capital, or financed their self?
Reto: We financed ourselves since August 2015 for the platform strategy, business model and first prototypes. But look to our US competitors like Lemonade, they raised $15 million. To bring the model to the markets as a peer-2-peer insurance leader, the capital requirements are high. The earnings prospects are also very high. So we need a strong partnership to fulfill capital requirements. After the first seed-round we will apply to be a licensed carrier in Switzerland and Germany. Patrick is a FINMA VAG registered insurance broker. This is enough to go to market for our first products “pooling” and “customer first”. This year, we will raise a further CHF 2,75 Millions.
Rick: What is the underlying technology for VERSICHERIX?
Patrick: The customer experience and usability is our focus. Technology follows business. Of course we are able to use new technologies like “smart contracts“ and “blockchain”.
Reto: the concept of “smart contracts” could for example be used as an audit trail to prove the terms of legal agreement were followed or not. Implementing a simple contract is fairly easy with a specific framework like Ethereum. But based on our principle – technology follows business – and not the other way round we always decide which technical concept fits the product’s needs best.
Rick: Thank you for the interview. Please give a short closing statement.
Patrick: I love the new wave of insurance like Lemonade, UVAMO, Teambrella and VERSICHERIX. Self helped with equal opportunities, rationality, freedom and responsibility.
Reto: I love the thoughts, to build a platform, where customers, investors and insurers can “play” fair the insurance game! This is social and democratizing the insurance model!
The author, Rick Huckstep, is an InsurTech thought leader and editor of InsurTech Weekly for The Digital Insurer.