The commodification of fast Internet and smartphones have made a whole new host of consumer-to-consumer or peer-to-peer (P2P) finance products possible. Insurance and insurtech are not remaining behind. The sharing economy has both opened up new avenues for insurance products and has resulted in new niches that actually demand these kinds of products.
P2P insurance products are relatively new and present an attractive opportunity for innovative insurance providers, but they can be tricky to navigate with traditional products because they require the adoption of new technologies and ways of thinking. The P2P economy is a different, more egalitarian playing field than the classic business-to-consumer (B2C) area.
In addition, insurers need to know who they are serving with these products. The demand is there – research from Deloitte indicates that some 40% of consumers in P2P businesses are interested in insurance products to complement and strengthen their business.
The four consumer segments for P2P insurtech
Currently, there are four major segments in the sharing economy that demand insurance products:
- High-rolling hosts. Think high-earning property renters who make a living (or gain additional income) from renting out real-estate through platforms like AirBnb. They rake in at least $20,000 a year from this business, and look likely to want to safeguard this income.
- Security-conscious sellers. The Internet has enabled new business models as well as new forms of crime, such as hacking, identity fraud and ransomware. P2P sellers with negative experiences in this regard – or with valid concerns in this area – are looking for more security beyond apps and programs.
- Frustrated freelancers. Sometimes, P2P customers end up not paying for their services, leaving freelancers feeling robbed. Insurance products could help them recoup these lost efforts and money.
- Distinguished deliveries. Investors in home delivery services want to make sure their investments aren’t for naught when the business they have bought into should fail to meet expectations.
Embedded insurance
One way of complementing these four P2P business profiles is to embed insurance in the transaction. This requires minimal effort on the part of the P2P businessperson and makes insurance a fixture in the market. The slight uptick in cost is offset by the ease of mind for the business that there is now an extra shield against risk, and as the Deloitte research shows, it seems that P2P businesspeople are likely to want to make that investment.
In addition, the embedded insurance product reduces customer friction and offers access to new customers that are hard to reach through the traditional market. In turn, customers get a wider range of risk management and pricing options.
The key for insurers is to join sharing economy platforms and position their expertise as a lever to gain business maturity and financial security. If insurers don’t join these platforms, competitors and new market entrants undoubtedly will.
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