Tradable insurance on the blockchain. Why we should think about it… Part 2 of 2.
Let’s get stuck in from the previous article. If we refer to the barriers of entry for the adoption of tradable insurance on chain (the pain), it will be as follows :
Each of these areas can be drilled even deeper into subsections. But I will try to answer them from a broader point of view. We are most happy to discuss everything in detail on our telegram channel as well. https://t.me/fidentiaX
P.S. I shall not cover any industry statistics as it is already widely covered in our whitepaper and the press.
Lack of Awareness
Precisely the point on why we are using 70% of our crowd token contribution to purchase tradable policies from the open market. By creating the buy side demand and demonstrating to our token members the value of the portfolio, we will be able to create a high headline within the tokenised community and also avail liquidity access to potential policy sellers.
Having a well thought out marketing campaign is a given as with all business start-ups. We will also actively engage traditional SME policy brokers, insurance agencies and other insurance blockchain solutions to further this as a broader community movement.
Sceptics of Crypto
From an adoption perspective, the focal point is to address this as a customer value proposition first, rather than a technological sell. People who are thinking of surrendering their policies generally follow the below sequence:
(1) They need the cash or the policy does not serve their foreseeable needs anymore.
(2) They want the largest available pool of potential buyers to get the optimal offer within a particular timeframe. The inverse relationship is actually mutual as well.
(3) Trust — they need to ensure that before they commit to the transaction, there is a trust protocol to enable them to eliminate middleman reputational risk.
(4) Privacy and security — the need to ensure that their policies and their personal identifiers are emplaced in a digital environment that does not succumb to architectural risk.
Point (1) and (2) will be the driver in the decision-making process as this is more relatable to intrinsic or survival needs of the participant. This would largely drive the commitment in engaging fidentiaX as we clearly satisfy those perimeters.
Point (3) and (4) is exactly why we are deploying blockchain technology. Which I will cover later in further detail.
As the value proposition is extremely clear, the receptiveness to a market entrant like fidentiaX will not be determine by the “stack” we operate on, but the purpose that we serve.
“how do we trust that these people can pull it off? And “Will they even do what they say they will do?”
In local speak, those two sentences form the essence in whether to choose to participate in the crowd token contribution or not. From a technological execution point of view and define on broad terms, what we are building will consist of two layers.
(a)Marketplace — Front end
This essentially is a function of resource and expertise that in today’s environment, is widely available. Uncharted Partners, an insurance technology consultancy firm who is a partner to fidentiaX fulfils this build requirement. We are really fortunate that we work together closely within the same office and our confidence towards them resolutes on their agile centric developmental deployments done for some of the biggest insurers in the world.
(b) The Blockchain Protocol
Roberto Capodieci, is one of the most regarded early adopters/developers of blockchain. The depth of his ability to execute practical blockchain solutions really holds no bounds. Coupled with his humble and reclusive disposition, you can really appreciate why he is highly sought after as an execution specialist. We are honoured that he and his team are our blockchain partner and that they share the same excitement in doing this together.
From a commercialisation perspective, the sole responsibility lies on the shoulders of both Alvin and I. The next paragraph will be rather self-indulgent, so please forgive me and skip the whole paragraph if you already know us in person. LOL!
Alvin and I spent most of our careers in some of the largest banks in Singapore handling the daily grinds of running a retail banking operation (Linkedin probably describe us better). Whether it is insurance, UHNW, compliance, regulatory engagement or sales & distribution, I personally believe that we had made our mark and earned our stripes in these areas. fidentiaX’s potential users is a community that we are keenly in touch with. The hardest part about kick-starting fidentiaX from our homeland (Singapore), where we had accumulate most of our banking and finance experience, is the intense scrutiny. From industry peers to known associates as far as 3 degrees of separation, it is entirely illogical to co-found this project in such a public manner (Crowd Token Contribution). Please do not misunderstand my prior statements as a lack of belief in the purpose to pursue the cause. But rather indulge with me and perceive it from an alternate perspective.Within the scope of my current engagement with the Uncharted Group, I could have easily championed the project financially as an advisor and choose to elect another individual befitting to co-found fidentiaX. It would have been less risky from a career perspective and I am sure Alvin feels the same way as well. This is truly about putting skin in the game and believing in what we are doing. We must succeed and deliver.
After seeking counsel from our internal lawyers and our external panel of lawyers, we believe that our business operations will comply with the regulators in Singapore. As such, we are opening our crowd token contribution to Singaporeans as well. Regulations in Singapore are of the highest standards in the world (be it crypto/blockchain related or insurance). It keeps us compliant and the channels are always available for us to engage with the authorities in a progressive manner. At the end of the day, it is really about doing the right thing, the right way for the betterment and safeguards of the given population.
As a mid juncture close to the article, I would just like to thank icobench for giving FidentiaX a rating of 4.8 over 5. We are truly humbled and our sincere appreciation for your mark of approval. Cheers!
FINALLY, AFTER 1000 words, we can move on to the “LOVE”
In my address of the challenges above, I guess I have inadvertently argued on our possibility for success in this journey. What I will focus on next, is the “love” of blockchain within FidentiaX.
So let’s examine the current state of contracts and relationships in its current transactional relationship:
(1) Insurer sells policy to Mr. John Doe
(2) John Doe trusts the insurance company as it is a good standing enterprise over the years in a highly regulated environment. TRUST = SAFE TO TRANSACT
(3) John Doe now needs to dispose of his assets as he has a financial need. Short of selling the roof over his head, he starts disposing of all the liquid assets he holds.
(4) John is now facing a difficult choice. Surrender it to the original insurer and get a discounted value or approach a traditional secondary insurance broker for a better quote (full disclosure — there are a few brick and mortar companies doing this in Singapore and they may perceive themselves as global marketplaces).
Herein below lays why FidentiaX’s blockchain solves a current divide.
(5) If he chooses the broker, John now needs to trust that the price quote by the broker, whilst marginally higher than the original insurer, it may not represent the fair market value which it can be sold for. Furthermore, John needs to trust the reputation of the broker to deliver on its promise of paying upon assigning the insurance to the broker.
If we really think about it, John is actually “giving” trust to the broker to ensure that they act with utmost good faith. These are not companies with the size nor stature of insurance conglomerates like Lloyds or Swiss Re here. And even they are prone to centralisation risk as well, which is precisely the point on why they are keenly looking into blockchain.
If John chooses to list his policy on a “localised marketplace”, well his really hoping that the medium will deliver on its promise of reach. Which will probably be confined to localised demand.
Let’s put forth the argument that in its current state, a buyer and seller can still physically meet at the lobby of an insurance company, and assigns the policy and hand over the cash at the same time. This actually can be done and it is precisely how it is done today between parties that have minimal trust towards each other. But how would this scenario pan out if the buyer lives in London and is willing to pay a premium for a Singapore policy? Does he wire the money first or does the seller assigns the policy first? Maybe get a lawyer to write out a sales and purchase agreement or use a broker intermediary as the contractual conduit or even maybe fly down and do it face to face? All four options incur middle layer cost that can border from inefficient to downright impractical.
Trustless and Consensus protocol
Blockchain solves this by fundamentally ensuring that both buyer and seller commits to their contractual obligations when the trade is enacted. Without the necessary proof of action, which is the deposit of funds on chain via a platform token, or the validation of assignment of the policy to the intended purchaser, the transaction cannot materialise. Only when the right obligations are met, and after the consensus protocol amongst the nodes has verified its integrity, will the transaction be completed.
The possibilities for a better insurance eco-system is at our doorsteps. I would really love to keep writing what we believe are other applications of blockchain in the insurance industry such as immutability of policy storage, architectural de-centralisation and collusion resistance. But these should be better discussed by gurus like Roberto Capodieci in another forum.
Our focus is to execute on our commitment and to proliferate adoption, through the pain and the love!
Douglas Goh, Co-Founder