The future of insurance, cheaper and better: Peer to peer protection

logo for peercover insuranceI spent fifteen years working in insurance direct marketing which, loosely translated, means I sent out millions of pieces of direct mail to people. Lovely job.

As a result I know exactly how much people dislike insurance and how little they enjoy buying it!

Insurance companies don’t help matters, with their reputation for using any excuse to refuse claims. So it’s good to see the peer-to-peer revolution spreading into the insurance landscape.

A shock in store for traditional insurers

It must be a threat to insurers, who have followed the same unpopular model for literally centuries, since the 1600s when some clever bugger in a City coffee shop first invented insurance. But it’s about time the whole industry was given a really good shake-up.

How does P2P insurance work?

Instead of people paying large premiums to protect themselves against something that might never happen, it lets groups of people insure each other for a fraction of the cost. And the global company Peercover is one of the brave new insurance pioneers making it happen.

Peercover groups don’t collect premiums. It’s much simpler and cheaper than that because policyholders don’t end up paying profit and overhead to insurance companies. Instead, every person in a group has a stake, and everyone acts as both an insured person and an insurer.

A group’s founder decides the conditions the group will work under, for example what can be insured and the maximum value of an item. If someone claims the payout is split between all the group members, once the majority of the group’s members approve the claim.

The amount of cash you pay out is directly in proportion to the value of the stuff you have insured as an individual. If your insured bits and bobs are cheaper than someone else’s in the group, your share of the claim payout will be smaller. Someone insuring an iPhone, for example, will pay out more than someone insuring a bog standard Nokia. If you don’t pay your share, you’re simply ejected from the group.

P2P currency exchange, another nail in the traditional financial services coffin

It sounds like a fantastic idea. And there’s more. Peer to peer currency exchanges are catching on fast, where instead of paying fees to change currency you simply hook up with someone who wants your currency and do a swap, an opposite trade.

Along with P2P lending, which I looked at yesterday, it looks like the financial services industry, which in many respects has treated us badly for a very long time, is due a very nasty shock unless they mend their wicked ways. Good.