[October 02, 2015]

A.M. BestTV: Crowd-Sourcing Startups Aim to Return Insurance to Its Roots

This episode of ^A.M.BestTV examines peer-to-peer insurance startups that are melding technology, social media and early insurance models to cover members. Click on http://www.ambest.com/v.asp?v=crowdsource1015 to view the entire program.

Consumers are banding together in groups to share risks and reduce their insurance costs.

"Peer-to-peer insurance is basically a particular networking or computer architecture that puts the consumer and the supplier of the resources together as opposed to the traditional client server model," said Fred Eslami, senior financial analyst, A.M. Best. "It allows people through various platforms, including Facebook, LinkedIn and Twitter (News - Alert) to come together and understand the cause, find similar profile individuals and all participate in this venture."

Startup peer-to-peer insurance companies are also called crowd sourcing or crowd funding, and they function similarly to captives and mutuals, in that a traditional insurance company is always behind them. Additionally, the difference between them and traditional insurance is essentially how the deductible is paid.

"Friendsurance started in 2010, and is a tech company that operates as a broker, which allows its customers to save a significant amount of money by grouping together around insurance," said Tim Kunde, chief executive officer, Friendsurance. "The principle that Friendsurance employs is our customers connect in small groups, which we assist them in doing, and if there aren't any claims within a given year, then our customers get 40% of their premiums returned. However, if there are claims, then the amount of cash returned is reduced. The concept is peer-to-peer for small claims, with traditional insurance in the background for larger ones."

The other person appearing in this episode:

• Chris Logan, director, Peer Cover.

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^A.M.BestTV covers exclusive A.M. Best information and reports, targeted topics and key developments in the (re)insurance industry every Monday, Wednesday and Friday. Sign up for alerts of episodes at http://www.ambest.com/multimedia/ambtvsignup.html. View ^A.M.BestTV episodes at http://www.ambest.tv.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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