The Fundamental Difference Between Insurers and Mutual Aid Platforms, Seen Through How They Make Money

How Do Insurance Companies Make Money? It Is Usually Summed Up as the Three Spreads — Put Vividly:

Mortality spread: the insurer predicts a person will die at 75, and he dies at 70 — five years gained. It collects 100,000 in premiums and pays out 80,000 — 20,000 gained.

Expense spread: the insurer expects it will cost 10,000 to serve a customer, and it ends up costing only 9,000.

Interest spread: the interest and investment income generated by the large premiums an insurer collects in advance. This is what currently makes insurers the most money, and it is what big capital values most. Having so much money in hand also confers great influence and the means to do a great many things.

And Mutual Aid Platforms? Because They Collect No Premiums in Advance and Pay as They Receive, the Result Is:

Mortality spread: does not exist.

Expense spread: a little. For example, a thousand yuan is collected for investigation costs and only five hundred is spent. KangAi Commune charges a 2 percent fee and Xiang Hu Bao charges 8 percent; the expense spread comes from this.

Interest spread: negligible. Because mutual aid platforms do not collect premiums in advance, the amount of pre-deposited funds is small — at KangAi Commune, this generates about 200,000 to 300,000 yuan a year, which is almost negligible.

By comparison, only the expense spread can barely be counted as a mutual aid platform's profit model, and relying on the expense spread alone is usually not enough for a mutual aid platform to operate. That is why many mutual aid platforms sell insurance, sell medical services, sell goods and so on — though all those selling insurance have been shut down. So there is an extremely significant difference between mutual aid platforms and insurance companies.

It is therefore quite wrong to regard a mutual aid platform as an insurance company, and mutual aid as insurance.