The digital revolution has created new opportunities for people to connect with others for personal and commercial gain.  As a result, brands can no longer overlook the power of the crowd.

This article has been created by the Foresight Factory, RSA’s source for consumer trend insight.

The story            

People are inherently social beings, with a hardwired need to form connections and communities with others.  Thedigital revolution has created new opportunities to connect with others for personal and commercial gain.  Consequently, peer-based advice, communities and marketplaces have an influential presence in consumers’ online and offline lives.  As communities unite to share and advise, brands can no longer overlook the power of the crowd.

In peers we trust

An important element of this trend is trust.  In an age when trust in traditional institutions has eroded, many consumers seek advice and recommendations from like-minded individuals.  The opinions of both consumers and independent experts have never been more sought after.  In 2018, 50% of GB consumers agreed that “if a friend or family member recommends a product or service to me I am much more likely to buy it” – the proportion among Gen Z is much higher at 72%. Widespread access to the internet has connected consumers with extensive (and freely available) opinions and reviews.  In 2019, 45% of GB consumers who used online communities did so to get advice.  29% of consumers also went to online communities for recommendations on what to buy.  Review culture – whether on social media, online forums or marketplaces – makes this possible. 

British consumers who read a review online posted by other consumers about a product / service at least monthly:

Of course, less people write reviews than read them; only 35% of GB consumers have written a review of a product or service (at a frequency of once a month).  The proportion among consumers who intend to switch insurer is greater at 42% and higher still among Millennials (54%).  Review culture has made it easier for consumers to make good choices and to find the right products.  Growing choice and competition in practically every industry vertical puts consumers in a position of power.  Peer-to-peer (P2P) communities have become a key part of the customer journey.  But how do we know if our peers are trustworthy?  Can we believe their reviews?  The recent demise of Lendy suggests that P2P models need to be treated with caution.

Engagement with P2P marketplaces and social spaces creates new streams of data about how consumers are regarded by their peers.  Services are also emerging that score individuals’ online reputations by scraping information about their digital footprint, including how other peers rate them in P2P markets.  This data is being collated (by new platforms and, in some cases, by authorities) to create a fuller picture of individuals and to complement, for example, credit scores.  Soon, reliability, reputation and trustworthiness scores may become associated with individuals, providing a confidence boost to P2P interaction (particularly involving strangers).

Sharing is caring

Peers not only help us along the path to purchase – they can be sellers and providers too.  P2P platforms and the sharing economy have revolutionised how consumers think about individual ownership.  P2P models in resell, mobility, finance and accommodation are common – think Airbnb, Uber, eBay etc.  According to Eurostat, UK consumers are the most likely in Europe to have engaged with the sharing economy to arrange an accommodation from another person – 34% had done so by 2017.  In 2019, 9% of GB consumers have used a peer-to-peer lending website i.e. a website service that allows them to lend or borrow money from individuals without the involvement of a bank or financial institution.  A further 16% have not but are interested in doing so in the future.  Among men aged 16-34 uptake is at 21%.  Overall P2P options are still dwarfed by traditional models but offer a distinctive alternative.

To take ownership models into the 21st century car brands are now splitting leases, allowing consumers to rent out their car when they are not using it, or to have access to a vehicle without purchasing it – something that has significant implications for insurers.  For example, peer car rental system Hiyacaroperate an app that lets consumers register their license and search for nearby cars to hire.  Touted as the Airbnb for cars, Hiyacar allows anyone to turn their car into a shared car.  All trips are insured by AXA so that disputes are settled by a third party, protecting the owner’s personal premium.  For members hiring a car, insurance is added to every booking and varies depending on their age, driving history and the type of car.

Collaborative communities

Membership business models are evolving too.  Co-funded entirely by communities of fans, more industries face peer-to-peer disruption in this way.  For example, London-based insurtech startup Laka offers a flexible monthly membership to protect bikes against damage, theft and loss.  When one member files a claim, the community are all charged a small amount to cover the cost.  If no claims are filed in a month, members do not pay a fee.  Members are grouped together so each sub-community has similar interests and value covered.  In addition, Laka caps the monthly claim fee for each member so they should not pay more than the “market rate” for traditional insurance covering the value of their gear.  In contrast to traditional insurers, Laka only makes money when a claim is made by adding 25% on top of each claim to cover costs and create some margin.  In this way, the insurer promises that its customers will never be charged more than competitors – but if everyone in the membership community takes better care, they will pay much less.

In the USA, insurance network USAA offers home insurance discounts to proactive communities in wildfire-prone areas. The discounts are given to homeowners in areas recognised by the National Fire Protection Association Firewise USA program. These sites are communities of fewer than 2,500 people in seven eligible states that have voluntarily taken precautions to reduce the risk of wildfire in their area.  In this way, leveraging communities can benefit both the insurer and the insured.

Image result for firewise usa

What does this mean for insurance?

Insurers can employ the power of the crowd to their own as well as customers’ benefit.  Creating forums or other social spaces where consumers can connect and share their experiences of using your service can help build trust and a community of advocates around your brand.  It also facilitates real-time feedback from both parties.  Other avenues to explore include shared coverage for peer-to-peer products and services.  Lastly, community-funded insurance built around like-minded individuals can ensure better behaviour, less claims, and lower fees.

We acknowledge that the appeal of P2P models has diminished with the failure of Lendy and recent sceptical press coverage.  Perhaps the value of P2P is not in the products currently on offer but in the innovation that comes from a peer-based model.