Breadfunds and the rise of truly shared insurance
By Pieter van de Glind – September 22nd 2016
‘Thank you,’ says a women in tears to a seemingly random group of entrepreneurs. ‘I have been sick for a year and all this time you have supported me with both compassion and money.”
I am at my first “Broodfonds” (Breadfund), meeting. Gathered with our group of 47 entrepreneurs we are having the bi-annual general meeting. It’s six o’clock when I enter the building. A creative hotspot located in the Midwest of Amsterdam. In the canteen of the building my fellow ‘Breadfunders’ are already displaying the food and the drinks everybody brought for this evening. Soon we are having dinner together and I’m getting to know everyone. The diversity is enormous: musicians and other artists, legal experts, all types of consultants, health experts and some people involved in the collaborative economy. Interestingly this mix directly enables new (business) collaboration opportunities too.
What exactly is a Breadfund? A Breadfund is a self-governing group of maximally 50 entrepreneurs, who cover for each other if someone gets sick. There are almost no overhead costs but a high degree of trust among the members. Read more about the Breadfunds on Wikipedia or watch this (Dutch) video.
Since the launch of the first Breadfund in 2009, the phenomenon has been growing exponentially to 223 Breadfunds today and counting . Even if the concept has grown, the size of the groups remains small. This means there is always a tiny chance of not being able to cover for everyone in the group if too many people get sick simultaneously. This was the case for 2 Breadfunds in 2015. I have always been sure that someone would create an extra layer on top of the Breadfunds to cover for that tiny percentage of temporarily failing Breadfunds. But who would make this happen?
A defining moment for insurance in the 21st century
It’s almost nine o’clock and the Annual General Meeting is well on its way when the chair tells us: ‘now we have something important to discuss. It is called the Breadfund Alliance and it is a simple system through which participating Breadfunds cover for one another in case one Breadfund is unable to cover for itself.’ There is excitement and some confusion in the room. It takes a while before everyone fully understands the concept. ‘Every month the members of a small and rotating group of Breadfunds who are financially healthy, donate 10% of their gift for that month, to the sick persons from within the financially empty Breadfund.’ Basically, different Breadfunds will cover each other in the exceptional cases when one or more participating Breadfunds are temporarily financially under water
Insurance companies
Since we founded shareNL, we have been continuously working with the insurance industry. Not only because the collaborative economy offers new market opportunities, but also because their very own business model is being threatened by new mostly peer-to-peer and cooperative solutions facilitated by dozens of start-ups and new coops. ‘Insuretech’ is on the rise. The Germanbased peer-to-peer platform Friendsurance enables friends and relatives to cover (part of) an eventual claim among one another. This company has proven how increasing the social ties among people in a single insurance group can decrease fraud and overhead costs while at the same time benefiting from free marketing as users share their experiences and invite their friends to the concept.
Some of the insurance companies we are, or have been, working with have taken notice of what is happening in insuretech. But chasing after those opportunities takes them months if not years. One of the obvious opportunities would have been to build that security layer on top of the Breadfunds to help out those few Breadfunds who are struggling. In this case, the innovator proved to be faster to innovate than the traditional organisations.
Voting
I am super excited. I have predicted this in many insurance company board rooms for the past years. Right here and right now my Breadfund is going to decide if this type of insurance is going to evolve into a fully-fledged alternative, organized bottom-up. What will this group decide?
When all confusion has left the room the chair starts the voting procedure. There is a short pause. And then...an overwhelming YES. My fellow Breadfunders believe that the Breadfund Alliance is a logical next step that fits perfectly into the philosophy of their own Breadfund. This is solidarity in action at very little transaction costs and with loads of social cohesion. It is not surprising that many other Breadfunds have already voted YES and joined the Breadfund Alliance.
Driving my bike back home I feel safe. I have made dozens of new friends, plus, if I get sick, I know there’ll be a watertight system formed by people around me that will support me with both money and compassion.
A big thanks for the ‘Breadfund Makers’ for inventing and designing the ‘Breadfund Alliance.’