Will a sharing economy model work in insurance? The announcement about the start up
These companies operate as brokers, managing the transaction between the end consumer and insurers. They offer either a deductible sharing scheme or a pooling mechanism to gain price discounts. The panellists spoke about their common challenges — sustaining growth and educating the consumer about an alternative approach to insurance. It remains to be seen if any can achieve critical mass. Of the three, Friendsurance is further along having started (way back!) in 2010. (See Celent report:
Similar brokerage models have also been adopted by
The Lemonade announcement stated that it will expand the social insurance model beyond sales and service by taking on risk on its balance sheet. They report that they have applied to be an insurer in New York. This will be an early, significant test given that state’s past regulatory reputation. However, the company has some strong arguments to make. They can point out that sharing increases transparency and aligns the interests of an insurer with their consumers. Additionally, the sizable initial capitalization will positively influence regulators.
These alternative approaches are good news for the industry as they challenge the traditional, sometimes adversarial, relationship between insurer and insured. The ability of Lemonade to secure $13 million in initial funding from veteran venture capitalist firms (
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