What Is the Future of Insurance?
InsurTech is changing insurance and the Vernam project will contribute to this better future.
Insurance is one of the biggest markets in the world, valued at $4.73 trillion in 2016 with a growth rate of 3% per year. And while the influx of modern tech disrupting the market may have you worried, many insurers are adamant that this industry isn’t going anywhere.
At the same time, the insurance industry can’t run from the changes heading toward it with blinding speed. Personal device connectivity, АI, blockchain and more new tech is all getting plugged into the game of insurance, with the final outcome being cost savings, automation, personalization, and a better experience for the insured.
But while product improvement is the focus of most InsurTechs, the time is also ripe for us to change the very landscape this industry operates in. The future of insurance has never been more open to democratic change.
At the Vernam Project, we’re taking advantage of exactly this opportunity. Our goal is to add transparency, democracy and efficiency to an industry stuck in the last century. Why is this change even needed and what will it look like?
Read on to find out.
Managing Risk Since 3000 B.C.
Insurance has been a staple of civilization for as far back as we can see.
The earliest known instance of risk management was in the 3rd Millennium B.C. Chinese merchants would distribute their goods across several vessels to minimize losses if one of the vessels capsized or disappeared. Smart, right?
After all, insurance was and still is all about assessing, managing, and transferring risk. Since 3000 B.C., all that’s changed is the surface-level product, but not the function.
The 17th thru the 19th centuries, for instance, saw the emergence of fire insurance, property insurance for homeowners, underwriting, life insurance, accident insurance, national insurance programs for the sick and old (welfare), and insurance against illness and unemployment.
The most significant development during this time (other than the addition of new products) was adding mathematical and statistical tools, and this gave rise to modern insurance companies operating on the basis of premiums. This is still the basis of our insurance industry today.
By the 20th century, insurance was incorporated into governmental legislature and cemented as a staple of the average Joe’s household.
The moral of the story? While the function of insurance certainly won’t change, the way it works leaves much to be desired since it’s been a while since the latest major shift in this industry.
InsurTech — What Changes Can You Expect in the Near Future?
InsurTech, or а term for technology innovation for insurance inspired by “fintech”, has been a huge buzzword since 2015. The first InsurTech startups appeared as early as 2011, and investment in such companies has been rising every year since then, especially the US, UK and German markets.
These companies are focusing on a variety of improvements or even game-changers for the industry, the biggest focus of which seems to be Big Data.
Leveraging Data
With personal devices gathering data about us and our behavior every single day, there’s a lot of opportunity for insurance companies to tap into this data to create more customized services.
Overall, the trend is to move away from human intuition and towards a data-backed approach that’s more reliable.
Applications will likely include:
- Programs to promote better/healthier behavior that prevents risks from the get-go
- Individually tailored insurance products
- Custom premiums based on more sophisticated risk assessment
Stronger Engagement
Insurance is about to step into our lives in a much more in-your-face kind of way. Whereas it’s traditionally been a service you look into once a year, in the near future insurance offerings will be integrated many lifestyle apps we use on a daily basis.
This will allow insurance companies to offer their products on a real-time basis, whether you’re using an app for financial services, health, or retail.
Full Automation
Artificial intelligence will help insurance move from human-operated to fully automated. It’s not only that customers are demanding a digitized, streamlined experience, but this is also a chance for insurance companies to replace slow pre-internet processes with more cost-effective, forward-thinking solutions.
Underwriting and claims processes will both be streamlined, for the benefit of the insurers and the delight of the insured.
Blockchain Transparency
As a move away from pre-Internet paperwork, smart contracts and other blockchain tech will be a big part of the insurance automation of the future (underwriting claims and automatic payouts included).
Storing personal data on the blockchain related to healthcare, financials, and more will further push the industry to a better future, by reducing fraud and increasing efficiency. Financial institutions would be able to acquire accurate personal data without any friction or tiresome manual processes, thereby speeding up processing and reducing costs.
A distributed ledger is the way of the future, and have no doubt, that’s where insurance is also heading.
Shorter Value Chains
A huge portion of the traditional insurance value chain goes to distribution. There are the insurers, and then there are agents, brokers, underwriters, and more. This makes the insuring process very slow and costly. Beyond that, big margins for providers means less money for claims payouts.
Innovative tech might be the solution to finally fixing the huge inefficiency inherent in this industry by creating shorter, more direct value chains. That’s actually part of our mission here at Vernam.
Going Beyond the Product — Creating a Democratic, Transparent Playing Field with the Vernam Project
While improving insurance as a product is all very exciting, new tech is beckoning an even bigger change — not just of the product, but of the landscape. This is where the Vernam Project comes in.
Our goal is to change the insurance system itself, by making it more transparent, democratic, and more financially beneficial to the end-users. Right now, the insurance industry is highly inefficient, and the insured are mostly paying for insurance distributions — not claims.
Vernam is about to disrupt this system by taking out the middle men. We’re building a marketplace for insurance directly connecting insurers and people who’d like to be insured. Тhat actually makes us pretty special — only 9% of InsurTech companies are going this far.
Benefits of Disrupting the Insurance Industry with Blockchain
As we’ve seen, the insurance industry suffers from a few significant problems including lack of efficiency and lack of transparency between the parties involved. Vernam’s insurance marketplace solves both of these at the same time.
Cutting out the middlemen, mean lower insurance premiums for end-customers. On average, brokers get a 20% commission for each piece of insurance sold — now that cost is completely taken out.
At the same time, putting up personal data securely on the blockchain will enable insurers to optimize their offers. With access to an end-customer’s past insurance history, insurers will be able to make better risk-assessments and provide customized offers based on real data, not intuition.
But our vision at Vernam only starts here…
Vernam’s CryptoSafe Product
Further down in our timeline is the development of our own digital insurance product, called CryptoSafe (CS). Making use of smart contracts, CS will guarantee that when a defined set of events occurs, the client will be compensated with a certain amount of Vernam Tokens (VRN).
CS will have a few advantages over standard insurance including:
- End-to-end digital process — fast & automated
- Smart contract — guaranteed correctness towards the client
- Transparent premiums and coverage policy
- When no damage is claimed, the CS smart contract will return a defined percentage of the premium to the client
At Vernam, we’ve beyond excited to start revolutionizing insurance. Will you join us and help make transparent, secure, automated insurance a reality?
Team Vernam
To find out more about the Vernam Project, download our whitepaper or visit our website. Follow us on Facebook and Twitter.
