The insurance middleman is dead, long live the insurance middleman
Henri Deshays, Investor, Newfund
Turbulent times for the insurance industry. Not only is covid-19 wreaking havoc – with costs between $35 and $50 billion by the end of June according to S&P Global Ratings – but it is coming on top of innovation painting the sector. Insurance industry leaders have a historical advantage over newcomers: insurance is often regarded as a dull, complicated business, an obligation to comply with. This tends to favor established institutions with a reassuring household name. In the US, where insurance companies have to abide by the regulation of each state they operate, this may be even more true. Yet several factors seem to be leading to a declining incumbency advantage. As fintech challenges traditional banks, it is no wonder that Insurtech is defying the industry's giants.
The rise of peer-to-peer insurance
P2P insurance, like traditional insurance, consists of people gathering resources to insure against a specific risk. However, while conventional, profit-driven insurers generally keep the premiums they do not pay out in claims, P2P insurance refunds unused premiums to its pool members. Alternatively, Lemonade, an insurance company created in 2015, donates the funds to a charity chosen by its users. As it only takes a flat fee before donating what is left over, there is less conflict of interest between the insurer and the insured.
Lemonade also boasts about its AI bot making it easy to buy a policy in a few seconds, and that is because the one-click purchase is the next trend in the industry. A trend that benefits a new type of brokers.
The Insurance Industry Is Facing Double Disruption From Peer-To-Peer Insurance Companies As Well As Digital Brokers Making Insurance A One-Click Purchase – And Incumbents Are Not Ready For It
