Cryptocurrency Insurance Could Be a Big Industry in the Future

As eventful a year as 2020 was, it really seemed quiet for blockchain. The technology is constantly on the be being explored and pushed forward to fit new use cases. It continues to mature – and is constantly on the attract more growth and investment. Big names from Facebook to Mastercard have created entire divisions devoted to blockchain. 

Some of the best blockchain use cases actually come within the insurance industry, which is primed to use benefit of blockchain benefits. In fact, the below three benefits are already showing great promise:

1. Blockchain is dependable and helps reduce fraud
Blockchain’s first major benefit is its trustworthiness. Its ability to get consensus algorithms included in it permits provenance, auditability and immutability. This makes it much easier to build smart contracts on blockchain, that could hugely benefit the insurance industry. 

Hosted on blockchain, smart contracts hold the conditions of an agreement between two parties written into lines of code, which allows the contract to self-execute after meeting the agreements of the long term contract. Because blockchain is an immutable ledger, smart contracts permit timely, transparent and trustworthy transactions.

Blockchain can also provide an entire proof-of-insurance ledger, meaning your business will no longer have to rely on one-off state databases. An industry-wide shared claims ledger designed for inspection, without per-transaction charge, can also help reduce fraud. Plus, with regulators able to monitor all insurance variables on the ledger instantly, auditing can be much smoother and less burdensome because of blockchain.

2. Blockchain permits more automation
Smart contracts do more than permit transparent transactions. They are able to also streamline the insurance process. 

Because it stores the immutable terms of the contract, a smart agreement can facilitate and enforce the contract and its own performance. The entire insurance claims process can be streamlined because blockchain executes on the terms of the smart deal – and it can so automatically, making automation a huge benefit for blockchain. For instance, with blockchain, impacted assets and insureds are immediately confirmed initially Notice of Loss. 

The payment piece of insurance can also become streamlined and more trackable. When you yourself have payment information within the blockchain database, this can expedite multiple payments being built to different parties according to the smart contract and determination of liability. 

Overall, blockchain can save insurance companies lots of time, effort and money by lowering administrative costs.

3. Blockchain can help accumulate and store more useful data more securely
Insurance companies thrive on data. In collaboration with other technologies like internet of things (IoT) and artificial intelligence (AI), blockchain can accumulate a range of usable data. 

For example, if an insured wears a fitness watch and agrees to talk about data – metrics such as heartrate, oxygen levels and sleep times – you can offer them a reduced premium on their healthcare insurance. Data collected by IoT is stored on the blockchain and then read by AI, helping your company make smarter decisions on insurance top qualitys. 

The same thing can happen with vehicles. IoT devices monitoring a car can qualify insureds for safe-driver discounts and give your insurance carrier more data on driver habits and vehicle performance to utilize.

As cryptocurrency markets mature, they are attracting players from other industries. The insurance industry is one of these. 

According to a Bloomberg report, cryptocurrency insurance is poised to become “big opportunity.” A spokesman from Allianz, one of the world’s biggest insurers, told the news publication that the company was exploring product and coverage options in the room because cryptocurrencies were “becoming more relevant, important and prevalent on the real economy

Types of Crypto Insurance Policies for Businesses and Corporations
Whether you have a small business or large corporation, below are a few of the coverage types you should consider to help protect your business’s cryptocurrency investments.

Custody Insurance for Crypto
Cryptocurrency needs to be stored somewhere, whether in a crypto wallet, on the cryptocurrency exchanges, or within an online platform of some type. If you lose access to your cryptocurrency (for example, if you somehow lose access to your crypto keys or if the business holding your assets goes out of business), then Custody Insurance may save the day.

It is estimated that around 20% of existing Bitcoin is either lost or stranded in wallets without known passwords (1). By May 2021, investors’ accumulated lost Bitcoin is comparable to roughly $185 billion (USD). Chances are this Bitcoin will never be recovered.

A custody insurance policy for cryptocurrency could include crypto key storage, key recovery, and disaster recovery which means that your business does not lose access to its Bitcoin and other digital currency forever.

Crime Insurance for Crypto
When there is an act of dishonesty, theft, robbery, destruction, fraud, or cyber fraudulence, Crime Insurance (or Fidelity Insurance) can cover a businesses’s claims for the increased loss of money, securities, inventory, and other assets – such as digital assets, like Bitcoin, Ethereum, and other cryptocurrencies.

In the cryptocurrency market, theft and fraud are rife, and companies are often surprised by how often having a crime policy will come in handy.

It is critical to protect your company and its digital assets against crime and theft by purchasing the right insurance cover. An experienced commercial insurance broker can help you choose the correct coverage and ensure that your company’s cryptocurrency is safe.

Is your insurance company ready for blockchain? 
It only takes a couple of ground breaking players to go the needle on adoption of new technologies. Cryptocurrency is already a household name and has been for some time. Banks are starting to provide custodian services for cryptocurrency. Soon, insurance carriers will get started accepting payments in cryptocurrency. Wider adoption of blockchain outside cryptocurrency will observe.

Insurance companies are already coming together in groups to develop blockchain solutions and make them scalable through the industry.