Author Topic: PEER-TO-PEER MARKETPLACE MODEL COMES TO INSURANCE  (Read 4135 times)

jheizer

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rawraw

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Re: PEER-TO-PEER MARKETPLACE MODEL COMES TO INSURANCE
« Reply #1 on: June 27, 2015, 06:42:59 AM »
Typical insurance makes it's money on the float and not excess premiums.  I'm skeptical that this would be profitable enough for the risk. It is bounded by 100% loss, but one of those can eliminate lots of smaller gains along the way.  I'm not very proficient in insurance, but I view it as a fat tailed distribution.

Rob L

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Re: PEER-TO-PEER MARKETPLACE MODEL COMES TO INSURANCE
« Reply #2 on: June 27, 2015, 08:52:40 AM »
It might be an idea whose time has come; guess we'll see.
Looking at the team members I don't see a lot of in depth experience in the insurance industry, but lots of experience building the LC platform.
Is that the cart diving the horse?

jheizer

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Re: PEER-TO-PEER MARKETPLACE MODEL COMES TO INSURANCE
« Reply #3 on: June 27, 2015, 09:22:17 AM »
I kind of had the same thoughts as rawraw.  What if anything will they do with the float?  I saw that the company itself basically acts as a reinsurance for the individual pools so that is good from a policy holder side.  Not directly capping total pool losses to just investor money and kind of has a bit of that company money in the game we wish LC had when it comes to collections.  Then again it could be 100% reinsurance they are buying and they don't so it would be the same.

The more I've thought about it though it is almost like a retail investor version of a catastrophe bond.  So really not that crazy of a new concept, just for the general pool of funds vs cat.

As far as risk, in an economic down turn we know LC loans will have rolling defaults over time, but if a hurricane, hail storm, tornado hits BAM, there go all the funds.  (Assuming homeowners/hurricane is a coverage they'll offer).  Guess it depends on how they allocate the pools.

Agents? Collections? Adjusters? But I guess I'm mostly just interested in what lines/coverages they'll offer.  Either way I don't think I'll be able to get myself to invest.  I know enough to know I don't want the risk personally and it directly competes against 1/2 our income haha.
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AnilG

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Re: PEER-TO-PEER MARKETPLACE MODEL COMES TO INSURANCE
« Reply #4 on: June 27, 2015, 12:54:32 PM »
It is bounded by 100% loss, but one of those can eliminate lots of smaller gains along the way.  I'm not very proficient in insurance, but I view it as a fat tailed distribution.

This is exactly how p2p lending is - lot of smaller gains, bounded by big losses, fat distribution (option like characteristics). Insurance units purchased by p2p insurers will behave similar to notes purchased by p2p lenders. As long as p2p insurer's losses are capped at the units purchased, it may work.

What will happen to p2p insurer money used to purchase insurance units? Who is going to hold the money until an insurance claim is made? What happens to this money when insurance is cancelled? Who benefits from the returns earned on this money? How will be insurance premium distributed to p2p insurers? I need to see more how the whole thing is structured.

I hope these products will be restricted to institutions and sophisticated investors. Insurance business has several level higher of complexity compared to consumer lending. And very few retail lenders understand even consumer lending.
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jheizer

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Re: PEER-TO-PEER MARKETPLACE MODEL COMES TO INSURANCE
« Reply #5 on: June 27, 2015, 01:02:53 PM »
Oh and how they will deal with/file with every state's department of insurance.
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rawraw

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Re: PEER-TO-PEER MARKETPLACE MODEL COMES TO INSURANCE
« Reply #6 on: June 27, 2015, 01:14:45 PM »
It is bounded by 100% loss, but one of those can eliminate lots of smaller gains along the way.  I'm not very proficient in insurance, but I view it as a fat tailed distribution.

This is exactly how p2p lending is - lot of smaller gains, bounded by big losses, fat distribution (option like characteristics). Insurance units purchased by p2p insurers will behave similar to notes purchased by p2p lenders. As long as p2p insurer's losses are capped at the units purchased, it may work.

What will happen to p2p insurer money used to purchase insurance units? Who is going to hold the money until an insurance claim is made? What happens to this money when insurance is cancelled? Who benefits from the returns earned on this money? How will be insurance premium distributed to p2p insurers? I need to see more how the whole thing is structured.

I hope these products will be restricted to institutions and sophisticated investors. Insurance business has several level higher of complexity compared to consumer lending. And very few retail lenders understand even consumer lending.
Just because they are similar doesn't mean the probability of outcomes are anywhere close. I'm positive the insurance tails are much fatter, the degree of which depends on what is being insured.