Indiegogo tests optional insurance for crowdfunded products

It's been a tough year for crowdfunding site Indiegogo, which has seen many of its business plans offering dubious projects (though some of the apps are cool). The site appears to be responding by adding new features to ease investor concerns.

The company is experimenting with "optional insurance," which guarantees investors a refund of their investment by paying an insurance premium if they do not get the final product within three months of the scheduled release date of the project product. The service is currently being tested on a stress management wearable device, Olive. The project's product fundraising price is $129, and investors can pay an additional $15 to purchase insurance to mitigate the risk.

The company confirmed the trial to TechCrunch but declined to reveal more about its plans.

"Indiegogo regularly develops and tests new features to meet the needs of investors and business planners. This pilot is currently only for the Olive project," a spokesperson told us.

The move to introduce insurance is significant for Indiegogo, which is considered the second best option for conducting crowdfunding campaigns, after Kickstarter.

Indiegogo has looser controls and screening for more bizarre and obviously fraudulent projects, which may be one of the reasons why it introduced insurance.

Matt Burns from TechCrunch wrote an article earlier this year on the investment risks of crowdfunding projects, highlighting many Indiegogo-led projects. He specifically pointed out that Indiegogo's "flexible crowdfunding" service has divided the responsibility of crowdfunding. "Flexible crowdfunding" allows companies to ignore their fundraising quota after paying a fee and fully raise funds.

The introduction of insurance to help investors reduce the risk of funding unrealistic projects is welcome, but there are still many uncertainties in investing in projects through crowdfunding services such as Indiegogo and Kickstarter.

Indiegogo received $40 million in Series B funding in January this year, and the company is also testing the waters in other areas. The company launched a "continuous crowdfunding" service in September. Unlike traditional crowdfunding services that set investment windows for a period of one month, this service allows projects to receive investment continuously.