Peer-to-peer insurer heading our way

Peer-to-peer insurer Friendsurance has announced it will target the Australian market in 2016 after securing over AU$20m in funding from venture capital firm Horizon Ventures.

The Berlin-based business works by allowing customers with the same insurance type to form small groups, where a part of their premium is paid into a cash-back pool.  If no claims are submitted during the year, the group members get their cash back in the following January.

Friendsurance Founder Tim Kunde said: “We intend to use the fresh capital to grow further in the German market and expand internationally. Our first expansion target for 2016 will be Australia. We are considering expansion opportunities for further markets.”

Since launching in 2010, Friendsurance now employs more than 80 staff in its Berlin HQ, and claims to have over 100,000 customers – more than 75,000 of which came on board in 2015 alone.

I think it’s dangerous to ignore this development, but I don’t think it’s going to be a big disruptor for brokers.

Geoff Stooke, of Modern Risk Solutions in Melbourne, was the broker who placed insurance for Australian sharing economy businesses PetHomeStay and Airtasker. He says brokers should take heed of Friendsurance’s move, but not fear it.

“I think it’s dangerous to ignore this development, but I don’t think it’s going to be a big disruptor for brokers because this is more aimed at consumer level, and the Australian middle class already gets a good deal when it comes to insurance pricing,” Stooke told NIBA.

He added that Australia’s current socio-economic climate offers itself to ventures of this type. “The USA and parts of Europe have a diminishing middle class, but Australia has the highest middle class proportion of its population – 66% – a strong aggregate demand, and a mature insurance market that is highly regulated. It’s an attractive market.

“What’s most interesting to me is to see that Friendsurance has attracted backing from Horizon Ventures, which is owned by Li Ka-shing – the Asian equivalent of Warren Buffett – who is now also present in the Australian market through his deal with IAG.

“Personally, I think it’s good to see someone advancing a different model and it’s going to be interesting to see how successful Friendsurance will be. There are more than 100 peer-to-peer insurers around the world now, so it is on the increase, and it’s only a matter of time before someone finds a model that provides the efficiencies and value consumers need.

“But each jurisdiction has a unique culture, so what works well in one country may not work well in another.”

Friendsurance won’t be the first peer-to-peer insurer to hit our region. PeerCover, which operates on a similar concept, launched in New Zealand in early 2015.