InsurTech-Blockchain Briefing #3: InsurePal (incl. Interview)
The Distributed Blockchain-Based Social Proof Insurance Platform
InsurePal is challenging the $7 trillion global insurance market of today with a distributed, self-adjusting insurance platform. Harnessing the power of blockchain, they introduce a completely new model of risk selection, guided by the science of social proof. In other words, their network uses peer-to-peer endorsements to improve segmentation, lower premium costs and offer incentives to their users. The distributed insurance platform has reinvented the science of social proof to work similarly as a third-party deductible in banking.
The social proof motivates beneficiary behavioral patterns. And, blockchain’s immutable record is an impeccable way to store the social proof into the ledger. As such, it can serve as an important sign of one’s diligence and can be used to gain benefits across various insurances and even across different industries.
The simplest application of social proof would be in motor insurance: John’s best friend Mary knows his driving habits and therefore endorses him. For that, she gets an immediate bonus, whilst John ends up with a cheaper premium. If nothing goes wrong, that is pretty much it. However, if John files an at-fault claim, Mary is the one held liable.
I had the chance to ask Matt, one of co-founders of InsurePal, a few questions about this solution:
Interview with Matt Peterman, Co-founder & InsurePal CEO:
Could you please give a short introduction about you and what you did before InsurePal?
Matt: For many years, I was in insurance fraud prevention, witnessing how irregularities affect good clients and the opposite, how the system is exploited by the mischievous ones. During my work, we have processed more than €6B premiums and corresponding amount claims for leading European insurers. InsurePal` co-founder Tom Volk is also a co-founder of company ADACTA, a leading European vendor for insurance core software, generating $25million revenue and employing 450 people in Ljubljana, Zagreb, Belgrade, Moscow, Brno and London. Together, we wanted to find an effective and agile solution for the insurance industry that is stubbornly inefficient and in desperate need of disruption. We made an accurate mathematical model, calibrated on a real motor market data and saw that today, the top 1% representing the safest drivers are overpaying for their insurance for a whopping 83% and the top 10% are overpaying for 71%.
What is the idea behind InsurePal? What problem is it solving?
Matt: We are radically changing the process of segmentation. The idea behind InsurePal is to use the science of social proof or in other words, to use individual’s social network endorsements to help him get a significant price reduction of their insurance premium. Besides the fact such peer-to-peer pressure model provenly improves the process of segmentation, it also reinforces behavioral patterns that benefit not only an individual but groups/society as a whole. To sum up, we have successfully reinvented the social proof for insurance and even filed for patent protection in US and worldwide.
From the insurance perspective, our method works a third-party deductible. When making their endorsement in a form of financial commitment, endorsers have to use their own diligence and are also rewarded for their good judgment. Even more, the network plays on the responsibility between trusted social contacts. Consequently, the model can self-regulate in a way that mischievous individuals are excluded by their peers or motivated to behave more responsibly. This model is easily applicable, even to the countries known for corruption, due to the fact that subgroups who are willing to play honestly, can and do appear anywhere in the world. By using social proof to push insurance prices down, new types of insurance that have not yet existed will emerge, for example, insurance of blockchain business transactions, which is one of the first ones InsurePal will explore.
This model is easily applicable, even to the countries known for corruption, due to the fact that subgroups who are willing to play honestly, can and do appear anywhere in the world.
What Blockchain Technologies are you using and why? How is your platform structured?
Matt: The classic insurance policy becomes a smart contract. The social proof endorsement is registered on a ledger and can be used in varieties of ways, across different insurance segments and even across industries. A Social Proof TrustScore representing one’s trustworthiness will be calculated for each user (eg. each blockchain node) and will work as a valuable information. Apart from that, the blockchain brings transparency, agility and cost-reduction in the sector that has resisted to change and therefore, delivers value across the entire chain.
InsurePal dApps and smart contracts will be built on top of Ethereum (a Next-Generation Smart Contract and Decentralized Application Platform). Ethereum blockchain is InsurePal first choice due to its widespread acceptance within the blockchain community, carrying a great future potential for our platform’s scalability, flexibility, and versatility in the long run
What is your first pilot project about?
Matt: InsurePal wants to make a fundamental switch in paradigm. Rather than accommodating irresponsible clients and having expensive administration, the platform will grow a community of diligent individuals who share a common value of reciprocity. Our key challenge remains to build an agile insurance platform on blockchain that will manage to acquire a sufficiently critical mass within a relatively short period of time. In addition to the pilot project in the UK, many resources and energy will be devoted to acquiring all licenses and make the business partnership that will allow the platform a global scalability. Also, we desire to communicate and attract both, the users who are already at home in the crypto and those who currently use the classical insurance but are ready to make a change. Especially with the latter, we will have to work on building awareness and educate them on the use of cryptocurrencies and pros of the insurance run on the blockchain.
UK pilot has a target of acquiring 30.000 new insurance policies, representing 1% of UK market share. Even more, we are already discussing a possibility to start in a parallel project with a large insurer with around €1B GWP. They both represent a huge market and will give us the feedback needed to fine-tune our blockchain platform. When the InsurePal platform will be up and running, any third-party insurance or other company will be able to re-sell the social proof platform by using the platform for a pre-determined fee.
InsurePal wants to make a fundamental switch in paradigm. Rather than accommodating irresponsible clients and having expensive administration, the platform will grow a community of diligent individuals who share a common value of reciprocity.
What is your roadmap? What will be next?
Matt: Our Roadmap is thoroughly explained here: https://insurepal.io/roadmap.
In addition to innovations in the already known segments of insurance (motor, life & health, property), InsurePal also intervenes in the completely new area, firstly by securing blockchain business transactions and hereafter by offering different insurance product by quickly adapting to the needs of the crypto world. We, therefore, target both, the already established users of blockchain and those who have a bad feeling of overpaying for their insurance.
The crypto is expanding from digital trading to something that will soon become a vibrant parallel economy. InsurePal is making important strategic partnerships already today to build the three basic pillars of future business represented by blockchain ID, arbitrage, and insurance. They will help grow confidence among all the stakeholders and massively speed up the business operations on the blockchain.
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