Friendsurance was valued for its documentation rather than its innovative concept.

      Cover Genius has acquired Friendsurance, the Berlin-based company that pioneered peer-to-peer insurance. The transaction has taken effect immediately, but no details on the price have been revealed by either party.

      Friendsurance established its reputation on a straightforward concept: small groups of policyholders pool their resources, and those who remain claim-free receive a cash-back reward at the end of the year. Their German-language website still refers to the company as the creator of peer-to-peer insurance and acknowledges its introduction of the claims-free bonus in 2010.

      However, the announcement of the acquisition and the statements within it do not mention peer-to-peer insurance at all.

      What Cover Genius actually purchased is clearly articulated by the buyer, focusing on the less glamorous aspect of the business. “Friendsurance has spent over a decade developing the technology, extensive banking networks, and institutional compliance necessary to facilitate this,” said Angus McDonald, CEO and co-founder of Cover Genius, in the company announcement.

      Further details are provided in the text. Cover Genius highlights its infrastructure built on PSD2 open banking frameworks and a regulatory framework tailored to regional GDPR requirements, referred to in Germany as DSGVO. This combination, according to them, “neutralizes the complex regional regulatory environments that usually impede digital product deployments.”

      Friendsurance’s website also describes another asset: its platform integrates with over 175 insurers and utilizes machine learning to process unstructured data.

      Both companies are pursuing what is termed Bancassurance 2.0. This model has banks selling insurance to their own customers through their apps, generating non-interest revenue.

      Friendsurance’s German homepage conveys its message succinctly: it encourages banks to manage their customers' insurance as well, emphasizing that clients prefer to keep all their finances under one roof.

      Tim Kunde, co-founder and CEO of Friendsurance, framed the acquisition as a solution to a scaling issue. “We developed Friendsurance to address a significant friction point. Banks aim to provide modern, customer-oriented protection, but outdated infrastructure and compliance hurdles make this exceedingly challenging,” he noted.

      There appears to be genuine demand for this offering. A YouGov survey commissioned by Friendsurance revealed that 52% of Germans are interested in managing their insurance contracts via online banking. Interest was highest at 67% among individuals aged 35 to 44, while it decreased to 42% among those over 55.

      The timing of the acquisition is noteworthy. On July 14, Cover Genius announced a $100 million investment from Vista Credit Partners, achieving a valuation of $1.9 billion. Just two weeks later, they made this acquisition. Since Vista Credit Partners provides credit rather than equity, this represented financing rather than a new ownership round.

      Cover Genius is a significant player in the market, operating in over 60 countries and all 50 US states, and partnering with notable companies like Klarna, Revolut, Stripe, Booking.com, eBay, and Uber. Both Klarna and Revolut are making strides into regulated banking, positioning them as ideal customers for an insurance venture.

      Embedding protection in the checkout process means Cover Genius sells insurance products integrated within another company’s platform. Their XCover platform manages the policies, XClaim processes approved claims in over 90 currencies, and BrightWrite provides real-time pricing for offers. The company has covered more than 73 million customers with 240 million policies, leading to $3.2 billion in gross written sales.

      Selling insurance through banks is more challenging than in the travel sector. Policies sold alongside checking accounts are subject to regulations that do not apply when selling travel insurance, which is the gap Friendsurance aims to bridge.

      Friendsurance has faced more challenges than its initial coverage suggested. It raised $15.3 million in March 2016, led by Horizons Ventures, according to EU-Startups. By 2020, the company was pursuing debt financing instead; Carrier Management reported that in June, it had secured nearly $1.7 million through the lending platform creditshelf.

      The European fintech sector has long anticipated consolidation. Valuations continue to rise among leading insurtech firms, with Ominimo reaching $1.4 billion and Alan surpassing $5 billion, while smaller platforms are seeking acquisitions.

      Undisclosed terms often indicate a price that parties are reluctant to disclose. While the peer-to-peer concept brought Friendsurance fame, it was the compliance infrastructure that made it an attractive acquisition.