Peer-to-Peer (P2P) insurance is an increasingly popular start-up model. The front runners, including Guevara in the UK, Friendsurance in Germany and Tongjubao in China have all set their sights on the P2P model as creating disruption in insurance. However, despite founders’ enthusiasm, examples of P2P insurance ventures securing major funding are few and far between. One notable exception is New York based Lemonade, a technology-first and legacy-free insurance offering that has just raised a $13m seed round from Seqouia capital.
Lemonade’s peer-to-peer offering is based on small groups of policyholders that pay premiums into a claims pool. If there’s money left in the pool at the end of the policy period, members get a refund. This is similar to a small mutual insurance company or self insurance group, however according to the Lemonade team, its insurance policies will be cheaper and easier to use than traditional products. Although Lemonade is the first P2P insurer to register as an actual carrier, it will be interesting to see how Lemonade differentiates itself in the highly competitive and heavily regulated US property insurance market.
Lemonade co-founder Shai Wininger has summarised his team’s approach as “challenging the way insurance companies work, with a peer-to-peer business model fuelled by self-servicing technology. We’ve seen this kind of combination breathe new life into other industries, and we’re determined to do the same for insurance”.
Ultimately, Lemonade is notable for securing one of Sequoia Capital’s largest ever seed round investment, however without further info on their operating model it is difficult to draw conclusion about how they will proceed given the wide variety of P2P insurance approaches that already exist.