WEEKLY WRAP: Peer to peer insurance could be coming to Australia

WEEKLY WRAP: Peer to peer insurance could be coming to Australia | Insurance Business Australia

WEEKLY WRAP: Peer to peer insurance could be coming to Australia
Peer to peer insurance could be coming to Australia
Germany has Friendsurance, the UK has Hey Guevara and now New Zealand has PeerCover and they have their eye on the Australian market too.

Former Marsh actuary Chris Logan is the man behind the move to bring peer to peer insurance to New Zealand shores.

Logan’s plan is to use an even simpler model than those overseas - people pool their excesses across a range of products in general, health and some life insurance products from different insurance providers.

If the funds are exhausted members are left with the excess which they would have had anyway.

Whilst Logan is focusing on New Zealand for the time being, if the business is successful, an Australian expansion is not out of the question.

“I think generally people in New Zealand are more willing to consider new ideas and are less conservative, and if it goes well in New Zealand then of course I’d consider applying it to the Australian market and beyond,” Logan told  Insurance Business.

“I think one of the main things is there’s greater fairness and transparency,” Logan continued.

He said Friendsurance had cited benefits including fewer fraudulent claims and less exaggeration on claims and he expected the same for PeerCover.

Group size would ideally be between 4-10 people and could be anyone from a group of friends or family members, a club, or perhaps clients of a financial planner.

Everyone puts in a third of their excess with the maximum payout being the excess or three times the deposit so that what it pays out reflects the amount each person has paid in.

PeerCover would manage the escrow account and help with the claim by making a recommendation for payment or not.

For example, if a member put in a motor claim but more than 50% of the group believed it wasn’t valid the claim wouldn’t get paid.

By the same token, if PeerCover made a recommendation that a claim not be paid and the majority of the peer group said otherwise within a five day deadline, the recommendation would get turned over and the claim would be paid.

“By moving away from the strict peril definition and the terms and conditions there’s potential for fairer outcomes,” said Logan.

“What I really like about that is, if that’s the case and the claim wasn’t paid by the insurer because it didn’t meet the terms or whatever, if the peer group said they thought it was a valid claim that provides evidence for the customer to go back to the insurer and say ‘my whole peer group thinks it’s a valid claim so you may need to reconsider.’ I feel it empowers the customers.”

Logan said PeerCover’s income would initially come from a claims handling fee per claim but eventually he hoped to add broking to the services offered.

He thought it would appeal to younger ‘tech savvy’ people to begin with who could use it as a mechanism to fund higher motor insurance excesses, for example, by effectively backing themselves.

Equally though, older people moving towards retirement and tightening up on expenses might be interested.

Another difference from the overseas models was that people wouldn’t be locked in for a year and could change groups at any time or just pull their money out.

Logan said insurance companies shouldn’t feel threatened at the prospect of premium being taken out of the market.

“It won’t take a huge amount because it’s only dealing with excesses. If anything there’s potential to bring people who are currently not insured back into the market,” he said.

“There are some good opportunities, some gaps that traditional insurance might not be covering."

He said he was open to feedback and could easily tweak things to make it more user friendly if need be.

“It’s a good idea and I think people are just waiting around for it to happen, so I’m helping that happen!”

Global assistance company head to Nepal
Allianz Global Assistance (AGA) has set up a crisis unit to identify its customers on the site of the devastating Nepal earthquake which rocked the Himalayan nation this week.

The 7.8 magnitude quake has killed nearly 5,000 people with the death toll still rising, according to CNN, as aid continues to trickle into the country for locals and tourists alike.

AGA said that many of the tourists in the country have insurance linked to the company and has set-up the crisis unit to aid those on the ground in the country.

John Myler, CEO of AGA, noted that the company has set-up in Nepal and will help in whatever way it can.

“We can confirm we are in contact and assisting our customers in Nepal who are insured with Allianz Global Assistance Australia,” Myler said.

“We are sending two highly trained Australian nurses to Kathmandu today to assist with efforts to care for the injured on the ground and support our customers to get back to Australia.

“They will meet the other Allianz Global Assistance doctors and nurses that are coming from around the world to assist with the relief effort.”

Eight million people have been affected by the earthquake which hit the country last Saturday, destroying some 70,000 homes.

For more information on the earthquake and to donate to the relief effort, click here.

American insurer sued over Hurricane Katrina fraud
Mississippi Attorney General Jim Hood announced this week that he has filed a lawsuit against State Farm Fire and Casualty Company over an alleged scheme to avoid paying claims related to Hurricane Katrina.

The suit, which was filed in Hinds County Circuit Court, accuses State Farm of avoiding payment on legitimate wind damage claims by mischaracterising the losses as flood damage.

The alleged scheme affected thousands of Mississippi residents in the wake of Hurricane Katrina, and sparked a long-running legal battle between the insurer and the state.

Hood maintains that State Farm abused the Homeowner Assistance Program (HAP), a state-run financial resource to provide monetary help to those whose insurance did not fully cover the damage caused by the storm to their homes and businesses.

“The Mississippi Homeowner Assistance Program was set up to pay homeowners for Hurricane Katrina damage that was not covered by insurance,” said Hood.
“State Farm took advantage of our program by causing HAP to pay for wind losses that State Farm should have covered under its homeowner policies.

“Remarkably, State Farm and other insurers have walked away from Hurricane Katrina and experienced record profit in the years following, while Mississippi continues to suffer.”

Hood first sued State Farm in 2006 on behalf of 600 policyholders, alleging the company refused to cover Katrina damage, according to a report from the Clarion Ledger. That case was settled in 2007.

More recently, a federal jury in a 2013 case found that State Farm avoided covering policyholders for wind losses by shifting the blame on flood damage.

The insurer was required to pay $750,000 in damages to a couple who filed suit under federal whistle-blower laws, plus an additional $2.9 million in attorney’s fees and expenses, for defrauding the US government.

That case considered just one case, however, as whistle-blower laws limit lawsuits to the case whistle-blowers are able to provide “independent, personal knowledge” about.

State Farm responded briefly to the new lawsuit Tuesday.

“We are still reviewing the lawsuit filed earlier today, which was not expected considering what we have done in solving claims as a result of Hurricane Katrina,” said Phil Supple, a spokesman for State Farm.