“Peer-to-peer” insurance startups are the new disruptor to face the industry, and while they are gaining traction in other markets, Canada would do well to steer clear. That’s according to Quebec’s financial sector regulator, the Autorité des marchés financiers.

“Consumers could be exposed to losses, for example, if pool participants unreasonably refuse to pay a claim or if the pool has insufficient funds,” a statement from the AMF read in part. “In addition, in the event of insolvency, losses would not be covered under current compensation regimes, since they only protect consumers who have taken out insurance from an insurer licensed with the AMF.”

While Canada as yet has no peer-to-peer insurance business, Germany’s Friendsurance is a high-profile example that operates as a broker with insurance partners and rewards groups of customers with cash at year’s end if the group has made no claims.

New York-based peer-to-peer insurance startup Lemonade Inc. raised US$13 million in 2015 and is anticipated to launch as a licensed, peer-to-peer property and casualty insurance carrier this year. Berkshire Hathaway Inc. is one of the reinsurers that signed on earlier this year to back Lemonade should losses exceed expectations