P2P Insurance Offers Small Business an Affordable Alternative

P2P Insurance Offers Small Business an Affordable Alternative

Small business owners need to find secure insurance policies that are affordable. Traditionally, their market has been underserved by both carriers and brokers. That’s where Peer-to-Peer (P2P) Insurance could fill the gap.

P2P Insurance for Small Businesses

The idea is simple. Small business owners use pooled resources to cover the things they need to run their businesses. These costs can include medical costs, vehicles and of course other items needed for operations. When the year is over, the companies with claims can get some of their money back or lowered premiums when there’s a surplus.

An Idea that Sprung from the Digital Age

At first, it might seem like an idea that sprung from the digital age. However, Kyle Hoffman, Vice President of Customer Success at Insureon, told Small Business Trends the origins go further back.

“The core concept being used by P2P insurers is not new,” Hoffman said, “but new players like LemonadeGuevara (now shuttered) and others are innovating with online direct to consumer channels, automation, AI and modern CX concepts.”

Mutual Insurance Design

P2P insurance is built on that older mutual insurance company design with a technology twist.

Leveraging the latest in innovation is one of the ways these P2P insurers distinguish themselves from more traditional carriers. These companies return more profits back to policyholders like small businesses. That makes them more attractive to small businesses but there are some drawbacks.

Lots of Claims?

If you’re a small business that makes a lot of claims, this insurance model might not be for you. Also small businesses need to keep in mind how policies are more limited with the P2P model. It’s a trade-off for the small business. What you get in a lower premium costs in the scope of policies available. P2P insurers keep the costs low by limiting what they offer.

Hoffman says these P2P insurers offer coverage for smaller business that might not qualify otherwise. However, there are a few caveats small business owners need to be aware of.

A Licensed Insurance Agent

“They should read the policy in-depth, consult with a licensed insurance agent, and ask lots of questions to make sure they understand what they’re getting and what they’re not,” he says. Long story short here is this is an option for small businesses, but one you need to look at carefully. Considering just the cost might not get you the coverage you need for a small business like a delivery company.

If you’re a small business owner thinking this might be the way to go, there’s another consideration to mull over. P2P insurance works best with a specific size of small business.

Large and Growing Segment

“Microbusinesses – companies with less than 10 employees – are the perfect target for P2P insurers because it’s a large and growing segment of the market that has traditionally been underserved by brokers and carriers,” Hoffman says.

He also says these smaller small businesses are favored by these insurers because they are easier to underwrite. If you’re the right size and think you might benefit from this insurance model, Hoffman also says you shouldn’t wait.

He predicts the P2P insurance industry will become more sophisticated with time. When that happens, he says the insurers will likely start serving larger businesses for more returns.

Doctor Photo via Shutterstock

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Rob Starr Rob Starr is a staff writer for Small Business Trends. Rob is a freelance journalist and content strategist/manager with three decades of experience in both print and online writing. He currently works in New York City as a copywriter and all across North America for a variety of editing and writing enterprises.

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  1. This was a wonderful article.