Do tradition and innovation go hand in hand? The benefits and risks of peer-to-peer insurance for consumers

Digital peer-to-peer (P2P) insurance platforms already exist, especially abroad. They fall into three categories. Those in the first category act as brokers, those in the second as insurers and those in the third as self-governors.

In this last category, apart from the platform, there are only consumers. They are the ones who make the decisions both at the group formation stage and at the compensation stage, with all the risks that this can entail. P2P insurance platforms offer a number of advantages. Products are inexpensive, service is fast (both when it comes to taking out insurance and when it comes to receiving compensation) and consumers are relatively autonomous. What's more, the way they operate encourages a degree of transparency.

However, these platforms also present significant risks. Consumers could misunderstand the products they are offered, be encouraged to make choices too quickly, or take out a product that doesn't suit their needs. Not to mention the risk of fraud. These problems are amplified when the P2P insurance platform is not registered with the regulator and is not subject to the supervision of insurance players, as is the case with platforms that have adopted the self-governance model. With the latter, consumers risk having little recourse in the event of difficulties, and not being compensated if the group objects.

All this is particularly worrying in the insurance context, where consumers are vulnerable and where one mistake can have catastrophic consequences for their assets. The supervision of insurance players is designed to achieve three objectives: ensure the stability of the financial system, supervise certified representatives and protect consumers by granting them numerous rights and remedies.

It is therefore essential that this framework be respected. However, our analysis reveals that P2P insurance platforms perform acts reserved for insurance players. Consequently, if they wished to do business in Canada, they would have to register with the regulator and be subject to the framework.

In Canada, regulators are at a crossroads. They must act upstream to protect consumers before P2P insurance platforms offer their services to a large number of Canadian consumers. Option consommateurs therefore recommends that they keep a watchful eye to ensure that no P2P insurance platform operates without the necessary permits, and identify the best ways to protect consumers. She also urges platforms to comply with the framework. Finally, she suggests that consumers exercise extreme caution.