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Insurance on P2P Lending

Hi,
I am interested in Peer to Peer lending. However, as it is not protected by the Government, I was wondering if there was anyone out there that provided insurance on lent money. Are there some P2P companies that offer protection or insurance?

Thanks

Ben
«1

Comments

  • Malthusian
    Malthusian Posts: 11,055 Forumite
    Tenth Anniversary 10,000 Posts Name Dropper Photogenic
    Why would any insurer they do that when they could just invest their money directly into the P2P platform? That way, they would take all of the returns, instead of insuring you, taking all the risk and letting you keep any returns minus the insurance premiums.

    For as long as you want an insured investment, you need to stick with deposit accounts protected by the FSCS.

    (The "insurance" keyboardwarrior refers to is primarily a reserve fund into which the platform's investors pool income. There is still a risk of up to 100% loss if the reserve fund runs out of money.)
  • Malthusian wrote: »
    Why would any insurer they do that when they could just invest their money directly into the P2P platform? That way, they would take all of the returns, instead of insuring you, taking all the risk and letting you keep any returns minus the insurance premiums.

    For as long as you want an insured investment, you need to stick with deposit accounts protected by the FSCS.

    (The "insurance" keyboardwarrior refers to is primarily a reserve fund into which the platform's investors pool income. There is still a risk of up to 100% loss if the reserve fund runs out of money.)


    It is primarily that but the insurance covers missed payments for other reasons (And it is protection above the ordinary provision fund which I don't believe many other platforms offer)




    What the insurance does for lenders

    Lending Works' insurance could pay out if and when a borrower is unable to meet loan repayments:
    1. It could do this when the borrower is unable to pay due to being made redundant.
    2. It could do so if the borrower can't pay due to sickness, accident, injury or death.
    3. It should pay 50% of the outstanding loan if a borrower gets an IVA (which is kind of similar to being made bankrupt) or enters into a debt management plan (the last stop before bankruptcy when lenders agree that the borrower can only afford significantly lower repayments).
    4. It could pay out in the event of borrower fraud or cybercrime
    From https://www.4thway.co.uk/candid-opinion/lending-works-insurance-losses-works/
  • bigadaj
    bigadaj Posts: 11,531 Forumite
    Ninth Anniversary 10,000 Posts Name Dropper
    It is primarily that but the insurance covers missed payments for other reasons (And it is protection above the ordinary provision fund which I don't believe many other platforms offer)




    What the insurance does for lenders

    Lending Works' insurance could pay out if and when a borrower is unable to meet loan repayments:
    1. It could do this when the borrower is unable to pay due to being made redundant.
    2. It could do so if the borrower can't pay due to sickness, accident, injury or death.
    3. It should pay 50% of the outstanding loan if a borrower gets an IVA (which is kind of similar to being made bankrupt) or enters into a debt management plan (the last stop before bankruptcy when lenders agree that the borrower can only afford significantly lower repayments).
    4. It could pay out in the event of borrower fraud or cybercrime
    From https://www.4thway.co.uk/candid-opinion/lending-works-insurance-losses-works/


    I like the use of the word 'could' in all of those scenarios.


    For a real life version of a provision fund ,maybe have a look at the Lendy version, if you're not prepared to risk capital in p2p then you shouldn't be in it in my opinion.
  • aroominyork
    aroominyork Posts: 3,522 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 27 June 2018 at 12:43PM
    Bogden96 wrote: »
    I am interested in Peer to Peer lending. However, as it is not protected by the Government, I was wondering if there was anyone out there that provided insurance on lent money. Are there some P2P companies that offer protection or insurance?
    Ben, you shouldn't just be thinking about the risk of borrowers not being able to meet their repayments. The worst that will happen is that you get less income than you expected and may even lose a little capital in a recession. The other risk is that the p2p companies go out of business: that is where the real and untested risk lies, IMO, and I am far from convinced that FCA accreditation means everything will resolve itself easily and your loans will be repaid. Beaufort/PwC offers a lesson in what that process might cost. All that doesn't stop me having c.8% of my investments in p2p, but I (think I) have assessed the risks.
  • taylornj
    taylornj Posts: 314 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    Ben, you shouldn't just be thinking about the risk of lenders not being able to meet their repayments. The worst that will happen is that you get less income than you expected and may even lose a little capital in a recession. The other risk is that the p2p companies go out of business: that is where the real and untested risk lies, IMO, and I am far from convinced that FCA accreditation means everything will resolve itself easily and your loans will be repaid. Beaufort/PwC offers a lesson in what that process might cost. All that doesn't stop me having c.8% of my investments in p2p, but I (think I) have assessed the risks.
    Should be risk of borrowers not being able to meet their repayments.


    There are lessons to be learnt from Collateral. A p2p company that has gone into administration.
  • firestone
    firestone Posts: 520 Forumite
    500 Posts Third Anniversary Name Dropper
    while the shield from Lending works can only be a good thing and when added to the loan may make some borrowers hopefully think about the deal they are taking for the lender it's still based on an unsecured loan.In some ways you get insurance of a type from the likes of Octopus Choice,Landbay,Kufflink etc who are lending on property so have a asset to reclaim(but with the risk of LTV & what is obtained) but with them they have either their money in the game or provision fund as well.
    With the likes of Ratesetter,FC & Zopa looking to float their companies the provision funds etc in P2P may come under more scrutiny which would be a good thing
  • mije1983
    mije1983 Posts: 3,665 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker Name Dropper
    It is primarily that but the insurance covers missed payments for other reasons (And it is protection above the ordinary provision fund which I don't believe many other platforms offer)

    However, the OP is after insurance against losing their money, so it's not really suitable as it won't rule out the possibility of that happening. Even Lending Works say...
    The Lending Works Shield does not provide a guarantee against investment losses


    and,
    As with all forms of investment, your capital is at risk.
  • msallen
    msallen Posts: 1,494 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    Bogden96 wrote: »
    Hi,
    I am interested in Peer to Peer lending. However, as it is not protected by the Government, I was wondering if there was anyone out there that provided insurance on lent money. Are there some P2P companies that offer protection or insurance?

    Thanks

    Ben

    Welcome to the forum Bogden. Will your second post be about a p2p company (that no-one else has heard of) you have discovered which offers fantastic insurance?
  • mije1983 wrote: »
    However, the OP is after insurance against losing their money, so it's not really suitable as it won't rule out the possibility of that happening. Even Lending Works say...




    and,


    Of course, but it should lessen the possibility of anyone losing their money. OP was asking about protection and insurance and Lending Works seems to be one of the few platforms offering it. If OP is totally risk adverse he shouldn't be looking at any P2P platform
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