Peer-to-peer insurance: the rise of the 'digital stokvel'

There are 11.4 million individuals belonging to over 811 thousand stokvels (i.e. an average of 14 individuals per stokvel) in South Africa who collectively save R448 billion a year (or approximately US$27 billion). So what are stokvels and what is the relationship with peer-to-peer insurance?

Stokvels are a “a type of credit union in which a group of people enter into an agreement to contribute a fixed amount of money for to a common pool weekly, fortnightly or monthly” (Andrew Lukhele, NASASA). The common pool is may have various purposes including insurance against adversity such as death (burial societies), as well as equipping them with the financial muscle to fund various other functions agreed upon by the stokvel as a collective, for example loans to needy members, education and other physiological needs such as housing, grocery shopping and business endeavors.

From the above definition, it is clear that stokvels are already used for peer-to-peer funeral insurance. Peer-to-peer insurance, enabled by the internet, expands on the coverage available for small groups to include insurance classes like home contents (e.g. Friendsurance), auto (e.g. Hey Guevara), mobile phone (e.g. CommonEasy), bicycle (e.g. CycleSyndicate), income protection (e.g. Broodfonds) and coverage for all one’s insurance excesses (e.g. PeerCover) etc. In some cases peer-to-peer insurance is  replacement for insurance, in other cases it compliments insurance.

So will digital stokvels aka peer-to-peer insurance succeed? Riovic is taking the charge in South Africa - the home of the stokvel, many others are independently launching in other countries.

For more information, see

• List of peer-to-peer insurers
• Unpacking the potential of South African traditional saving schemes
• Stokvels - Wikipedia