UK insurtech and pioneering brand Guevara announced in September that it had closed down, creating a shockwave and offering lessons to be learnt for innovative insurance propositions, particularly those built on a peer-to-peer model.
According to Guevara, the company failed to establish a fully capitalized underwriting vehicle. The business was formed in 2013, an early entrant into the UK insurtech scene which has only become established in the last few years. It grouped customers together, who pooled premiums and received refunds if any capital remained unclaimed at the end of the year. It also created an app that collected data from the scene of an accident.
Perhaps the difference between Guevara and other start-ups trying to lay roots was that it targeted the motor insurance sector, where many customers still feel more comfortable trusting established brands. Equally, on the back end, the motor market brings difficulties around profitability and costs for potential capacity providers.
Most peer-to-peer insurers have looked towards gadgets and niche personal lines, as they are less costly if a claim is made.
Lemonade is the most well-known peer-to-peer insurer globally – focusing on contents cover – and has received $60m in equity funding. The insurer pledges to give any money not used to pay claims to charity as part of its pledge to change the face of the insurance industry, and that may have set it apart.
The health sector has also seen the emergence of peer-to-peer insurance. Companies can group people with niche conditions and offer policies that would be either hard to find or extremely expensive in the mainstream market. So perhaps there wasn’t an obvious enough gap for peer-to-peer motor insurance in the UK.
Existing examples suggest there is a space for peer-to-peer insurance as long as the market and message are right.
Related to this, where Guevara’s concept has fundamentally run aground is the acceptance that the insurance industry is not a space in which – including for ‘unicorn’ start-ups – a new business can make progress without buy-in from incumbent capacity. Brilliant concepts and winning rhetoric focused on a new generation of insurance proposition aside, ideas have to win industry approval as well as customer hearts. A warning for peer-to-peer propositions is that Guevara seemingly fell short, or touted ideas the industry is not quite ready to accept.
By Ben Carey-Evans, General Insurance Analyst