Risk-sharing is the sharing of risks between groups of people.
This may sound lot like insurance, but it is not the same. Insurance is transferring risk from the client to the insurance company. In exchange a premium is paid that is set in advance by the insurer which is fixed for the running time of the insurance. Since the insurance company does not want to lose money the premium is set prudently, on the safe side for the insurance company. The college of supervisors also sets criteria and demands calculations to show that the insurance company has sufficient money to cover losses.
Gavin’s risk sharing model does not have fixed monthly premiums. Instead we calculate the total loss that is claimed every month and we divide that among all customers. This results in a contribution that changes every month. To ensure that the monthly contribution does not vary too much, a maximum monthly contribution is calculated in advance. If the total claim amount exceeds the maximum total contribution, then a small portion of the claim amount will be moved to the following month. So, in exceptional cases your claim may not be paid out all at once. We calculate the maximum contribution in such a way that the chance of this happening is very small.
Another big difference between traditional insurance and Gavin’s risk sharing is the interest. The price of an insurance contract is determined in advance. The consequence of this is that an insurer maximizes its profits by minimizing its risks or claim amount. Every euro that an insurer does not have to pay out is direct profit. This has lead to complicated policy terms and stories about insurance companies not wanting to pay up.
Gavin’s risk sharing model changes that radically. We put our customer’s claim at the core of our model, because we believe that is the basis of our agreement. Our expenses and profit are covered by a small charge of 15% of the total claim amount. In a way you could say that Gavin likes to pay out claims. But if it happens that the total claim amount exceeds the total contribution amount we could collect in a month, then Gavin will lower this surcharge to 5%. This is our way of helping to keep the cost of your insurance low. We think that’s only fair.
Just like ride-sharing and home-sharing Gavin’s risk-sharing is using new technology to innovate in an old and stuck market. Well…innovate. In essence our idea stems from the earliest roots of insurance, where the whole village chipped in when a fire had destroyed a neighbour’s house. Why did nobody think of this before? We’re wondering that ourselves.