Although the number of general blockchain related startups seems to rise, the number of blockchain insurance related startups is limited. How come?
Let’s explore several possible reasons:

  1. Insurance is not a sexy topic.
    Although financial professionals might be offended, marketing teaches us that insurance is a low interest product.
    Not an item to show off with on cocktail parties.
  2. Insurance is about risk; which is an abstract concept.
    So is blockchain. The combination results in square abstract which is hard to handle.
  3. To start a completely new insurance concept, you have to bring some serious money to the game.
    The costs of the startup plus the money to finance any solvency requirements.
  4. Lean startup approach does not combine well with insurance.
    A lot of tech startups use some kind of lean method to get their project running.
    The Lean method, however, is difficult to use in an insurance environment.
    It is hard to design a Minimal Viable Product in insurance. Only adjustments to the benefit of the insureds are allowed.  Maybe gaming could help here to provide a testing environment?
  5. Regulation is complex.
    If one chooses to comply with all local regulation, this might be a burden.
  6. Re-insurance.
    To start with even a rudimentary insurance product, the backup of a re-insurance company might come in handy to build trust with the audience and to fulfill the obligations. It is unknown whether the large reinsurance companies would embrace new breed insurance initiatives.Maybe it is time to ask them….

The technology based challenges and hurdles:

  1. There is a variety of blockchain, cryptoledgers and smart contract providers out there. Which one to choose?
    • Permissionless (PoW) or permission based (PoS) blockchain
    • With or without Turing complete programming language
  2. How will smart contracts build on the blockchain with their “dry code” relate to real world “wet code” legislation and jurisprudence?
  3. Where to find reliable oracles? Even the simplest tasks seem serious hurdles.
    How to check if somebody exists? Or has deceased? Simple questions but no easy answers. Despite of initiatives like Open Mustard Seed or OpenID.

So there a lot of arguments why not to start in a complex area such as insurance. But there are some advantages as well.

The new technology could build an insurance organization that is scalable without linear increasing costs.

The new technology could seriously cut the expense ratio of the current insurance products.

And possibly – we have to do some research here – the new technology is fit for small transactions and qualifies for handling micro insurance.

The community of people occupied with insurance and blockchain are limited, so it is relatively easy to get into contact and interact.
The first starters in this domain will likely get some serious attention.

All the ingredients to build an exponential concept seem available, so why not start?


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