Crypto And Insurance Industry Trends for Insurance CIOs To Keep a Check On

Digital assets present a chance for insurance companies to reassess their approaches to digital product creation, risk management and customer engagement. Insurance CXOs have a number of opportunities, new use cases and insurance market trends to keep an eye on. Due to maturing blockchain infrastructure and ever-changing regulations, amongst other reasons, insurance companies have been timid to underwrite crypto assets and grab significant profit opportunities, at the same time that a number of players are creating trends in the insurance market using crypto assets.

Crypto and insurance industry trends

Even post the recent cryptocurrency value plummet, the market cap is nearly $1 trillion at the time of this writing. The consistent user base frequently generates opportunities and new use cases. Here’s how a number of insurtechs have leveraged the potential of crypto assets in the insurance industry.

Underwriting crypto-related risks

Insurtechs are closing the gap by insuring crypto assets directly or the investing businesses.

Insuring Crypto Assets

Highly volatile cryptocurrencies are frequently the subject of high-profile breaches that cost investors and businesses millions of dollars in damages. Insurance companies can offer protection for cryptocurrency assets by creating crime and custody insurance policies, for example: 

• Cold storage key loss
• Hacks and fraud
• IT leaks and cyber risks

In 2019, in partnership with Marsh, an insurance broker and risk manager, Arch Insurance has introduced Blue Vault, a new tool that offers insurance protection for the secure storage of digital asset private keys held in traditional vault facilities. 

Bridge Mutual, a decentralized risk coverage platform, covers stablecoins, smart contracts, and other services with risk/insurance coverage. Furthermore, users can use the platform to provide insurance coverage, decide on insurance payouts, and be compensated for participating in the ecosystem.

Other players are Breach, offering cryptocurrency exchange insurance against hacks, and Nsure, DeFi underwriting and risk outsourcing company.

Underwriting Crypto Business

A number of insurers have also explored the potential of providing coverage for crypto businesses. Having said that, CIOs have a good opportunity to lead the competition as only a few companies provide this type of coverage.

Insurance companies in this category pay for costs associated with an investigation, business losses such as the time and money required to manage a crisis and notify consumers, lawsuits, and extortion in the event that hackers gain access to digital assets. 

Evertas focuses on protecting institutional cryptocurrency investors, such as exchanges, custodians, traditional financial institutions, funds, family offices, businesses and miners, against the complete spectrum of cryptocurrency risks.

Nayms is an insurance marketplace that uses smart contracts to code the rules for placing, trading, claiming, and settling insurance. Brokers facilitate the exchange of digital insurance contracts between buyers (underwriters and capital markets) and sellers (insureds) of various risks.

Other players such as Aon provide crime protection insurance for crypto custodians.

Become a digital asset or NFT investor

Insurance companies are getting into the investment cycle to spur innovation as far as back as 2020. By accepting premium payments in cryptocurrency or directly investing in crypto assets and/or NFTs (Non-Fungible Tokens). According to Cointeleraph, 11% of US insurers invest, or are interested in investing in cryptocurrency assets. 

NFTs have seen the introduction of numerous insurance-related projects, for instance:

• Insurance policies tokenized in the form of NFTs, which can be transferred, bought or sold. SURE, a cryptocurrency token provided by InSure to provide client insurance services. The insured buys a certain number of SURE tokens and holds on to them for seven days in their wallet. After that, the insured is covered against multiple risks up to a certain level, depending on the insurance plan.
• Platforms that let you borrow other cryptocurrencies using NFTs as collateral. 

Ideas about the insurance/crypto path forward

One of the biggest myths about cryptocurrency is that it encourages criminal conduct by enabling financial transactions while maintaining anonymity. Despite the fact that the owner of a wallet does not require ties to a confirmed human name, all Bitcoin transactions are public record and may be tracked back to their origin because the blockchain ledger is auditable by anyone.

To successfully delve into crypto-based insurance services, insurers must evaluate the risk profile of their clients very carefully and assess the client’s exposure to those risks. Before offering services to clients, insurers need to ask:

• What measures will their clients have in compliance with the crypto regulations and Know Your Customer (KYC) requirements?
• What are the potential risks they are exposed to?
• Are they using reliable software and solutions to mitigate those risks? I.e. screening customer transactions for risk of fraud, sanctions or other types of risks?

Since its debut, experts have predicted an increase in adoption of blockchain technology due to the benefits it offers the insurance sector, and by the looks of it, blockchain technology appears poised to transform the insurance industry with new blockchain-based tokens and solutions.

It is now up to insurance companies to evaluate how blockchain capabilities integrate with their business strategies. 

Are you a crypto business looking to protect your organization from illicit fund sources and non-compliance risks? Are you in insurance and interested in crypto? Start by learning the risks, how criminals use crypto, and other advanced concepts. Get crypto-certified in a matter of days with our on-demand training.