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Starting from the first P2P insurance launched by Friendsurance in 2010, the model of P2P insurance has been developed in various ways across companies, across countries. In this article, let’s recap some renowned examples of P2P insurance and understand their characteristics by classification.
The monthly premium of “Warikan” Insurance is not like that of traditional insurance in which payment are required beforehand. The amount of premium is determined based on the number of members who have got cancer in the preceding month. In other words, members do not have to pay any premium this month if there wasn’t any payment of insurance claim last month. As the number of members increases, the rate of management fee included in the premium decreases accordingly. If there are 1,000 members, the rate of management fee will be equivalent to 35% of the insurance premium, and the rate will be 25% if there are 20,000 members.
Also, the amount of monthly insurance premium is set with a limit by members’ age. The maximum amount of insurance premium per month is ¥500 for those in the age of 20~39, ¥990 for those in the age 40~54, and ¥3190 for those in the age of 55~74.
Those who register at Frich either become an ‘owner’ who manages the mutual aid group, or a ‘member’ of the mutual aid group. Every month the owner collects premiums from each member in the group and transfer a portion of them to insurers through Frich. Frich charges the owner system fee every month. If there are claims filed by members, the owner needs to confirm the details and request insurers to pay the claim. If there wasn’t any claims during the month, the premium for next month will be discounted.
‘Xianghubao’ is a mutual aid platform for users of Alipay mobile payment app. In Xianghubao, when somebody is diagnosed as a chronic disease such as cancer or acute myocardial infarction, the benefit payment is shared by the other members .
One criterion for becoming a member of Xianghubao is to have a ‘Zhima Credit score’ of higher than 600. Zhima Credit score is a score reflecting your credit status taken into consideration of several factors such as your payment record with Alipay.
Twice a month, Xianghubao shares the claims details, and members are asked to assess and approve. If the claims are passed the approval, members are asked to pay insurance premium with an addition of management fee which is 8% of the benefit payment. If there is no claim for insurance payment, the insurance premium will be zero.
On the other hand, if the amount of insurance payment increases, the amount of insurance premium will increase as well. The maximum amount of annual insurance premium is 188 Chinese yuan(Approximately $27).
Members are required to pay some deposit to join. the insurance premium is paid by the deposit four times in a month, the amount of which is calculated by the same way as Xianghubao. If there is not insufficient balance in the deposit, members are required to charge their deposit.
The insurance premium breaks down into the following:
20% as operating expenses;
20% as cost for reinsurance;
20% as risk buffer
and the rest 40% will be the ‘Giveback pool’.
If there are any balance left in the ‘Giveback pool’ after paying off the claims, Lemonade will make donations to the nonprofit organizations selected by the customers.
Friendsurance pools part of the insurance premium and uses it for insurance payment. If the pool runs out, its partners of insurance companies take the responsibility of insurance payment
Depending on the insurance payment results of the previous year, insurance premium will be discounted to a maximum of 50%.
P2P insurance can first be classified by the group size. Large-scale groups such as justInCase and Xianghubao are composed of members who do not know each other and are divided into groups by their risks. Therefore, risks can be more diversified compared to small-scale groups that are composed of acquaintances, since members are coming from various background and social groups. On the other hand, small-scale groups which share risks with your acquaintances have the tendency to be responsible and prevent themselves from accidents.
Also, there are two ways of premiums payments, prepaid or postpaid. If the premium is prepaid, the pooled premium will be cashed back to the members subject to their claim record. There is also a case where the pooled premium left is donated to a non-profit organization. If the premium is postpaid, the amount of premium will be determined based on the benefit payment, and the profit of the operating company depends on the number of insurance payment claims, rather than the number of members.
With reference to the above classification of P2P insurance, justInCase will continue to develop various P2P insurance products to satisfy the unserved or underserved needs.
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