InsPeer: The First French P2P Insurance Platform

InsPeer is an innovative web-based service enabling users to reduce their auto, motorcycle, and homeowners insurance premiums by raising their deductibles and laying off their increased risk on people they know. Generally, the higher the deductible, the lower the premium paid, so InsPeer allows user to get full insurance coverage for less by leveraging membership in a responsible community. Other than increasing the deductible, it does not require changes to their insurance contracts.

Users form small groups which, in essence, share the risk that one or all will file a claim. Users can participate in as many insurance groups as they like but their exposure is limited to €100 pledged to any one participant and €1,500 across the platform.

The service is completely free if there are no claims. In the case of a claim, InsPeer keeps a percentage of the claim paid by the insurer.

Similar ideas are being pursued by Friendsurance (Germany), Guevara (UK), and PeerCover (New Zealand).

Founded by Louis de Broglie (LdB) and Emmanuelle Mury (EM), InsPeer has been open since February 2015. InsPeer is backed by angel investors, Bpifrance, the City of Paris, and Region Ile de France.

Q:   You have recently launched. How is it going?

EM:   It’s been pretty interesting. We received a lot of press coverage and as a consequence we met a lot of potential partners, including insurance brokers and insurance carriers.

LdB:   Because we are in the market from the angle of the deductible, the insurance companies have been very interested. It fits with their current models.

EM:   Or to build a product together. We expect we can increase the number of insured people.

Q:   At its core, insurance all about pooling of risks. Are you simply boiling the mutual insurance company down to its essence, removing a lot of overhead, and passing the savings on to consumers?

EM:   Yes, completely.

LdB:   But mutual companies are so big that you don’t feel a sense of community. The idea is to use technology to help you leverage your local community – with all its positive aspects. So it is true that we are coming back to the original idea of the mutual company.

The peer-to-peer advantage is the fact that you band together with your community which creates more virtuous behaviour – a lower claims rate for instance. This can only be possible if people have a sense of community.

Q:   Are customers able to price the risk they are taking accurately? Do they know the odds that they’ll have to pay? Are you offering people tools for understanding the risks they are taking?

LdB:   First we developed what we call the “risk rating.” It is the expected claims rate of one person. So you can compare the expected claims rate of any one person to your own.

EM:   The risk indicator for consumers is expressed in years. For example, if it is 8.5 years, then you have a chance of paying a claim once every 8.5 years. This is the way risk is expressed on our platform.

Q:   What does the average auto policy cost for a year for a car owner in France?

LdB:   Roughly €500.

Q:   Is it possible that the financial benefits of raising your deductible – which might be a couple of hundred euros a year — are not sufficient to motivate large numbers of consumers to try something new? That the financial rewards will have to be greater to drive mass-market acceptance?

EM:   This is a very good question. We think that they do need a sufficient financial incentive and we are studying how large that needs to be with several groups. It is possible that the amount that you can save with the deductible may not be sufficient and we will have to provide more value.

Q:   You use a proprietary method to help users better understand their risk ratings. What data did you use to create this algorithm?

LdB:   For now, we are using industry data. But it is true that in the future, this algorithm will be built with our own proprietary data based on our users’ experiences on the platform and will be an important asset of the company.

Q:   Have insurance carriers been willing to share their data with you?

LdB:   Insurance companies are reluctant to share their data. However, there is some statistical data – national data – that we are using. But movement toward more open data would be nice.

Q:   Who are your customers today?

EM:   We don’t have enough experience to draw conclusions on this just yet.

LdB:   The deductible is more of a problem for lower-income people, so our original thinking was that our users would be those who want to avoid a deductible.

EM:   But those consumers may be more reluctant to use our service or may not be as well connected to people who can share their risk.

LdB:   They may be also less financially savvy.

Q:   My guess is that younger, more affluent, more tech-savvy consumers will be most willing to consider innovative insurance products.

EM:   That is our current assumption, as well. They are also participants in the sharing economy and willing to buy their insurance contracts online.

Q:   How do users come together? Can I ask all the members of my college class, or all the people who live on my street? Do I have to insure them if they insure me?

EM:   It has to be reciprocal, but members of your group can be anyone. What we intend to do is to allow people to search for others on the platform whom they may not know but who have the same level of risk that they do.

We could have used pricing as a mechanism to match people according to their risk, so if your risk is higher you would pay a little bit more than I. For instance, you may have to guarantee €110 of my deductible and I would have to contribute €80 toward your deductible because we don’t represent the same risk.

This proved to be difficult to explain to consumers so we stayed on a very simple basis, saying this is a mutual amount that you agree on and explaining what your mutual risk is.

Q:   Is there an optimal size group, whether for reasons of social dynamics or simply for mathematical reasons?

LdB:   In terms of social dynamics, we don’t know yet.

Q:   Can you explain your revenue model?

LdB:   We are only paid when a claim is made. We receive 10% of your claim.

Q:   Why not a flat fee or small percentage of what each group has agreed to cover?

LdB:   In this phase, we are thinking to reduce every point of potential friction. You don’t need to change anything in your insurance contract; you don’t need to pay anything. You just need to engage with your peers and agree to provide coverage.

We know this may reduce the perception of value, but our main concern right now is to remove every barrier to subscription.

Q:   How will the brokerage business model work? When will launch with this aspect?

LdB:   This is what we were referring to when we mentioned a contract for the whole risk.

EM:   We are already in talks with carriers to manufacture and distribute such a contract.

LdB:   This will take a year or maybe two. But the industry is very interested in this.

Q:   How are claims handled?

EM:   The same way they are otherwise handled today. You submit a claim to your insurance carrier, and then you pass your claims information onto InsPeer. We then validate your claim and this triggers the collection of payment under your InsPeer contract.

Q:  Will the P2P model inherently result in a better loss ratio? One premise of the P2P model is that peer pressure reduces the risk of fraud, and cuts down on small claims. Do you expect this to be borne out?

LdB:   The industry reports that P2P risks are lower risks than average.

EM:   Which makes sense because in our target contract what we want to do is lower the amount paid for insurance. If you are a bad risk then you are going to pay that deductible each and every time. If you are a bad risk, there is no efficiency – you don’t get anything more. The ones who are going to benefit the most from P2P contracts are the good risks.

Q:   In addition to distribution, what would working with InsPeer offer to traditional carriers?

LdB:   We may be able to impact profitability for carriers as much as turnover, and new regulations make profitability more important.

EM:   There is another benefit in that we might source certain types of risks that are being completely ignored by the insurance carriers because he is not in touch with his market, certain niche markets for example.

Q:   How are you regulated? Do you need any sort of insurance license?

LdB:   No, we do not need an insurance licence, but we are subject to financial regulation. We have presented our model and we are more seen as a crowdfunding platform for insurance.

Q:   Does French law make a specific provision for insurance between individuals?

EM:   Yes. It’s forbidden.

LdB:   It would simplify our lives if it was addressed directly. However, we are able to function legally.

(Note: InsPeer is regulated and abides by requirements of France’s National Bank and Insurance Financial Supervisory Authority.)

Q:   Is there any reason why every member of my group has to be in France? Could I form a group with people from the United States and German?

EM:   For now, you need to be in France, but ultimately we want the platform to be completely global, except that we will have to validate the concept in the country where you live.

Q:   After France, which markets are next?

LdB:   We don’t know yet. We don’t know if our next country will be in Europe, or be the U.S., or be a developing country where there is already some financial service that is based on peer to peer.

EM:  What we want to do is to finish our homework in France before extending to other markets, but as you guessed it would be easy to replicate the model in other countries.

Do you have a theory about why the peer to peer insurance model did not appear first in the U.S.?

Q:   I do have a theory. It’s that the structure of U.S. insurance regulation, which is primarily handled by the states, has held back innovation in insurance. You have the time and expense of 50 different regulators to deal with. The same issue – regulation by the states – is partly responsible for suppressing innovation in the business of facilitating international money transfers here, as well.

How are you using or planning to use connected homes and the internet of things? Will this help you more accurately underwrite risk?

LdB:   Of course. We hope to be in the forefront of this.

EM:   Once we demonstrate the value of peer-to-peer, it is going to be very easy to leverage the internet of things. It’s a natural extension.

Q:   What are your plans for raising capital?

LdB:   In the second half of this year we will enter into a second fundraising round.

Q:   Do you think that will be in France?

LdB:   French VCs are interested, but always the problem for French start-ups is that the amount you can raise is much lower than you can find in the UK or U.S. We will speak with international VCs but they will have to know that our primary market right now is France

Q:   You just wrapped up participation in Future en Seine. How was it?

LdB:   It was very interesting. It was good because it was a way for us to get out of the building and talk to more people.

EM:   There were a bunch of innovation events last month. Paris is the place to be in June as far as innovation is concerned.

Q:   Are you hiring?

EM:   If you could publicize that we are looking for a CTO who must be willing to work in Paris.

Q:   Are you considering any FinTech incubators or accelerators?

LdB:   It can be quite difficult to target the French market if your office is in London.

We don’t know yet. We know for example that Startupbootcamp in London is launching an insurance track. It’s something that is possible. But at our stage, the 8% capital they are taking is a bit hard to digest. Our connections with the industry are already quite good.

EM:   We might change our minds but this is not an option we are considering right now.

Q:   What can you me about the FinTech scene in Paris?

LdB:   We don’t have much point of comparison, but the startup ecosystem these days in Paris is quite dynamic and active. On the FinTech sector specifically, it is currently building itself. Truffle Capital has just announced a new FinTech incubator, and there is a FinTech association that is being built.

We will soon be moving into new space with other insurance-related startups.

EM:   And with start-ups working on the internet of things. Plus, we do have subsidies here, remember.

Q.   Does Paris need a dedicated FinTech accelerator in order to compete with London and New York?

LdB.   I think Paris is indeed missing an independent FinTech accelerator. All banks and Insurance companies are developing their vehicles separately. I don’t find the FinTech ecosystem very structured in France. It is coming together but it still misses international exposure and a star accelerator. Funding is also always more difficult here (mainly for series A rounds). Nevertheless, I am not always a fan of accelerators. It really depends how they are designed.