Insure thy neighbour: peer-to-peer home insurance coming to Australia?

Startups around the world are shaking up the insurance industry by engineering new peer-to-peer platforms, allowing customers to take charge of their own insurance policies, premiums and claims.

The peer-to-peer systems group customers based on a common factor - usually what kind of policy they are buying. Their premiums are then combined to create a pool or funds through which any claims from the group are paid.

Some platforms, such as the Russian Teambrella, set to go live later this year in Russia, will also allow users to effectively craft their own insurance policy, and vote on whether claims made by their group are to be paid or not.

"Peers control via voting each and every decision and are free to instantly delegate their votes to other peers, creating chains of trust. As long as there is no central money-handling party, every reimbursement payment to a peer is, in fact, a payment of premiums from other peers," explained a Teambrella white paper. "Though the total amount of premiums is not fixed, peers have full control over their spending."

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A reported 15 peer-to-peer insurers are currently operating around the world, in countries such as the US, Germany and Russia, and if the models prove successful, it may be only a matter of time before they reach Australian shores.

In fact, Berlin based Friendsurance, which uses social networks to connect groups of customers, already has plans to expand into the Australian market this year.

Dr Amy Gibbs, digital communications and content strategy manager at ANZIIF, told Insurance Business that, “Even if it [Friendsurance] proves not to be successful in a commercial sense, it lets the genie out of the bottle in a way, alerting Australian consumers to other models and methods of buying insurance that have already appeared overseas.”

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The model also has potential to save customers money. Friendsurance offers customers who don’t claim a cashback bonus, up to 40% of their premiums, while Lemonade, a recent New York peer-to-peer insurer gives unclaimed money to a charity of the customer's choice.

"We architected Lemonade to avoid conflicts of interest. We take a flat 20% fee, and give unclaimed money to a cause of the policyholder's choice," explained Dan Ariely, Lemonade's chief behavioural officer.

Lemonade claims to have digitised the insurance process, using AI robots in place of insurance brokers and paperwork. It plans to offer home insurance policies at US$35 per month and renters insurance at just US$5 per month.

If potential peer-to-peer lenders in Australia can offer the same kind of value, then the platforms are set to shake up the insurance industry here. And Gibbs noted that the Aussie market might be the perfect place for such disruptions - “Australians like technology, they like adopting it early and they like a fair go. Those three things make Australia an attractive market for disruption.”

If you're in the market for home insurance cover, visit our comparison section that pulls a range of policies from the major insurers through to the smaller challenger brands.