P2P Insurance

The basic mechanism of P2P insurance involves members forming a group and each contributing premiums to a shared pool. When an insured event occurs within the group, benefits are paid from the pool. If funds remain in the pool at the end of the period, they are refunded to members or applied toward the next period's premiums. This "surplus refund" mechanism is the key difference from traditional insurance.

In traditional insurance, the breakdown of premiums (the ratio of pure premium to loading) is opaque, making it difficult for policyholders to understand how much of their premium goes to the insurer's profit. P2P insurance discloses pool balances and claim payment status in real time, offering high transparency. Additionally, when group members know each other, social pressure acts as a deterrent against fraudulent claims, creating an expected reduction in moral hazard.

A challenge of P2P insurance is that risk diversification becomes insufficient when the group is small. If a high-value claim occurs in a 10-member group, the pool can be depleted, leaving coverage inadequate. To address this, many P2P insurance platforms partner with reinsurance companies to cover losses exceeding the pool's capacity.

Overseas, companies like Lemonade (US) and Friendsurance (Germany) have grown on the P2P insurance model, but in Japan, pure P2P models face regulatory hurdles under the Insurance Business Act. However, products incorporating P2P elements have emerged, such as justInCase's "Warikan Insurance." In this model, premiums are charged only in months when a member is diagnosed with cancer - if no one is diagnosed, the premium is zero. This represents a case of adapting P2P insurance's transparency and rationality to Japan's regulatory environment.