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Takaful – $15bn with a 14% CAGR…can P2P Insurance do the same?


Does the above sound like a PR announcement for the newest P2P Insurance company?  

Well, it’s not.

These are the Basis and Principles of Takaful according to the the Institute of Islamic Banking and Insurance.

Having worked in Malaysia for the past 4 years, I became very familiar with Takaful. When I first started hearing about P2P Insurance, my first thought was ‘Hmm, this sounds a lot like Takaful’.

This week’s article started out as a comparison of P2P Insurance and Takaful. However, as I started reading, researching and going down the rabbit hole more on the P2P topic, I had a Eureka moment.  It has to do with a topic that I have been writing a lot since I took over the weekly Insurtech articles at Daily Fintech; claims.

Let’s start with a bit of background on Takaful and P2P Insurance.  I’d like to thank my friend and former colleague Vas Ramanujam for helping me to clarify some of the points in the ‘What is Takaful’ section below.  Vas is an expert in Takaful and also an Insurtech enthusiast.

What is Takaful?

Broadly speaking, Takaful is similar to a mutual Insurance model, whereby it upholds the principles of mutual assistance, donation and the pooling of risk. The agreement is governed by the principles of Shariah law. It is in essence an agreement between a group of individuals who agree to jointly contribute to a pool of funds and ensure that any losses by individual members are indemnified as defined in the terms of the agreement.

There are a few different types of Takaful models, however I will not go into all the variants for this article.

Some of the other nuances of Takaful includes:

Where is Takaful bought/sold?

According to Milliman’s Global Takaful Report 2017, Takaful is primarily sold in the following areas:

SouthEast Asia – Indonesia, Malaysia, Brunei

GCC – Bahrain, Kuwait, Oman, Qatar, UAE and Saudi Arabia

Africa – Sudan, Egypt, Kenya, Gambia and Tunisia

Others – Bangladesh, Pakistan, Turkey, Sri Lanka, Syria, Yemen and Jordan

How big is the Takaful market?

I realize the US Insurance market alone is over $1 trillion in premium, however, these numbers are nothing to balk about.  Takaful is a major product around the world and has grown quite well over the past few years.  

What is P2P Insurance?

For purposes of writing this article, I have reviewed Friendsurance, TeamBrella, TongJuBao, Lemonade, Inspeer.  I have also included Lemonade in this analysis as they originally started as a P2P and I think a lot of the underlying philosophies of their business still resonate with the comparisons made in this article.  I will also still include them under the category of P2P player for purposes of this article only, as described below, though I do recognize that they no longer label themselves as such.  (the words in italic are a post-publish edit based on Lemonade’s pivot from P2P to ‘tech company doing insurance’ that I had overlooked).  

My comments on P2P Insurance will based on my aggregate view of these P2P players (by player, I refer to either a P2P broker or carrier) and their business models.  I will mention names when needed for specific examples and provide relevant caveats as well for differences in business model.  

For those of you that have followed my articles over the past two months, you will notice a trend where I often refer to the fundamentals and principles of Insurance. As such, rather than analyzing the companies above, let’s look at the principles of P2P Insurance.  

There is not a clearly defined set of principles for P2P Insurance from an institute, like I have for Takaful above.  However, from a review of these different P2P players, there are a few key principles which P2P players seem to abide by (which also relate to the problems they are trying to solve).  These principles are:

  1. Transparency – typically P2P players refer to transparency in relation to how premium is used, how profits are derived for their company and/or transparency in the claims process.
  2. Trust/Fairness – this can be two fold – 1) relating to the transparency point above, P2P players claim that a policyholder can trust them more because there is ‘no conflict of interest’ in paying claims/profit making and 2) because you are in a group of individuals that you have more closely aligned interests with, there is more of an element of trust because you’re not just pooled together with random individuals as with regular Insurance.  
  3. Control – the P2P player will typically show that they are giving more control to the customer, either by being able to choose the peers they group with (in case of self governing, actually selecting the person to join the group based on risk they carry), how claims are getting paid (in case of self-governing, which claims are paid), the charities they give back to, flexibility with respect to how the customer manages their policy, etc
  4. Reduction of Cost – similar to the concept of group Insurance, by bringing more people together,  the cost should go down.  Combine that with characteristics of a mutual, where there are shared interests/risks, the costs may go down even further. Further, P2P players expect to bring down the cost of claims due to the peer/social element and are expecting policyholders will claim less
  5. Affinity – trying to make policyholders feel ‘good’ about the Insurance they buy. Perhaps it’s cooler to say ‘I have a digital platform with a bunch of people around the city that allows us to connect and protect each other in case something happens to me or my stuff’ vs. ‘I just bought some Insurance’.
  6. Social Good – Combining all the above, this brings about the original intention of what Insurance was supposed to do – and be a social good that everyone can have! Oh, and let’s give some money to charity too.  

Where are the similarities between Takaful and P2P?

With the above Principles of P2P now outlined, let’s look at why I think these two products are so similar:

What can we learn from this?  How can the principles of Takaful and P2P be applied to the existing value chain?

In an article earlier this year, Bernard (Daily Fintech’s CEO) talked about Lemonade to see if P2P was a game changer.  This references the characters from Winnie the Pooh.  I am going to look at the various members of the value chain through the eyes of these characters and slightly change the definition of each character:

P2P Insurance primarily looks to strengthen the relationship between the Carrier and Policyholder…but what can we do to strengthen claims (and not just the payment of claims)?

The following diagram below shows the three parties involved in an Insurance claim.

I am using the term Provider loosely.  For Provider, I am referring to body shops for auto Insurance, contractors for home Insurance and hospitals/doctors for health Insurance.  

The current P2P players have been going after Insurance incumbents based on the sentiments I outline above.  This has brought out a lot of areas for improvement for the industry.  

If Insurance was just about the timely paying of claims, then these problems may be easier.

But what is the other factor not being addressed in any of these models?  It’s how to reduce and get fair cost from third parties who actually provide for the Insured to be whole again.  As I mentioned in last week’s article, this is the unknown factor that can lead to a lot of extra expenses/fraud to the Insurance company, which leads to the onerous processes we see in claims today.

If we can solve for this, along with some of the issues raised by P2P players on the current model, then we are really onto something meaningful for all.


Everything I read when it comes to Insurance and Insurtech mentions something about customer experience.  People buy Insurance for piece of mind.  They want to know ‘Do I have the protection I need, that will pay in an unfortunate event that I need to claim, without much hassle.  And will this protection be at a cost that is reasonable for the benefits that I am getting’

That’s it.

The rest is just bells and whistles.  

So, when we look at Insurance models – whether it be Mutual, P2P, Takaful, Conventional, etc, we need to look at the fundamentals and principles of Insurance and what it is there for, as well as the current problems across the value chain that could either use an upgrade or replacement altogether within the current business models.

I will admit, the marketing that some of these P2P players have is good, real good.  And they do touch on some big, big problems in our industry.  Things like trust, moral hazard, transparency, ease of claims and affinity are issues that big incumbents face every day.   I think these areas being brought up are good and actually bring to mind more questions to mind for our industry to think about:

Takaful faces the same sort of criticism as P2P Insurance.  P2P Insurance gets it for saying that it is nothing new.  It is just mutual Insurance with a sexy technology wrapper on it.  Takaful gets the same in regards to its comparisons to conventional Insurance.  

Does it really matter if P2P Insurance is repackaged mutual Insurance?  I don’t think so. What matters is the learnings we can get from different product lines and different markets.  In Insurance, there is no one size fits all approach and in the competition of incumbent vs. Insurtech, there will be no one winner (unless amazon or apple takes over it all).  A lot of the things being done and currently in existence can operate mutually exclusive of (and even in competition with) each other, and the best way to do that is by continually understanding each of the respective models, parts of the value chain, etc, and learning from it (with an aim of customer experience always in our mind).  

Honestly, I don’t care what the actual product is called.  Let’s look at fundamentals and what we are trying to solve first, then you can put the package around it and call it whatever you want to call it.  As long as it solves the issues outlined above, it’s good for everyone.  

Personally, I see P2P Insurance working for P&C more than I do for life and health. This is primarily due to social aspects.  I can’t see people being open to everyone else knowing about their health claims and/or even voting on whether their health claim should be paid or not.  

There is definitely a market for P2P Insurance and opportunities to grow this space. I see it as ‘coexisting’ with the current Insurance products (with the current still being the majority), which will continually get upgraded and enhanced by the technology solutions we are seeing today.

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Stephen Goldstein is an experienced Insurance executive and Insurtech dealmaker with a core focus on growing revenue, launching go to market initiatives and advising industry leaders.

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