Cryptocurrency-Based Insurance Policies Can Save Millions Against Hacks and Scams
Crypto Insurance: Potential Solution Against Crypto Hacks and Scams?
Holding onto the negatives is natural for most consumers, and when it comes to cryptocurrency, the ongoing findings of hacks and scams have made many turn down the crypto market altogether. Now that U.S officials were able to confirm that 12 Russian spies were able to breach into the 2016 U.S Presidency Elections through the use of bitcoins, many are doubting it more than they ever have.
This being said, as per Bloomberg, the potential for cryptocurrency-backed insurance is making its way to the market. The media platform shared that “there’s a hot new business that more and more firms are looking to get into: crypto insurance.”
With this being said, there might also be risks for insurers. For instance, how will the premiums be determined given that cryptocurrencies continue to fluctuate in prices? Or, how will insurers prevent scamming projects from addressing their firms as the providers of “crypto insurance”?
Bloomberg has assessed all these factors in a post. Furthermore, the media platform shared that the deficiency in regulations is what prevented heads like AIG from backing up crypto firms and start-ups. Similarly, they mentioned that the scams behind Initial Coin Offerings (ICOs) make it even more difficult.
As Per Bloomberg’s Quotes:
“The premiums from insuring such risk can be substantial. By some accounts, underwriters can charge a crypto-related company upwards of five times or more than your average business for coverage against loss or theft.”
Another financial services provider, Allianz has been looking into crypto insurance and has been offering practical solutions as well. Based on the claims made, the European company has been providing coverage for cryptocurrency token theft, which made them realize that a crypto-backed insurance should be their next endeavor.
Representative for Allianz, Christian Weishuber stated that crypto insurance will be the next “big opportunity” adding that “digital assets are becoming more relevant, important and prevalent on the real economy and we are exploring product and coverage options in this area”.
Another risk, besides that associated with the underwriter, appears to be for such insurance companies itself, as they uneasy with the fact that some crypto firms might use their names in a way to reassure crypto investors.
Leader of Aon, Jackie Quintal pointed out that insurers do not want to be advertised with certainty that they will secure one’s holdings. She also shared an example of an advertisement that insurers are not comfortable with.
Here Is An Example:
“We are insured with ABC insurance company and for it to be inaccurate or misleading. It’s definitely a concern.”
Although there’s evidence that risks are present for crypto insurers, with some disadvantages for investors like premiums that are far more expensive than traditional premiums, the fact that one can prevent theft altogether or get compensated through such coverage is advantageous for the crypto market. What is your stance on this matter? Are you for or against crypto insurance?