Startup spotlight: Breach insures the thriving crypto market
Boston-based insurtech Breach is introducing products and services specifically targeting the burgeoning cryptocurrency investment market.
Customers interested in using the service can currently join a waitlist. The company will offer insurance covering “loss of crypto assets due to cryptocurrency exchange hacks,” a valuable defence against one of the industry’s most persistent dangers; Breach cites the 50+ exchange hacks, $2bn of hacked assets, and $30bn lost or inaccessible funds in recent times.
Also included are:
- Protection against cyber theft
- Multi-exchange and multi-coin support
- Simplified crypto ownership that negates the need for multiple wallets, passwords, and hardware
Breach’s website intimates that coverage will be offered on Bitcoin, Ethereum, Ripple, EOS, and Bitcoin Cash initially, with others still to be added. Users can interact with their coverage through the company’s dashboard:
“Many insurers believe that crypto risks usually have an uninsured effect,” said Eyhab Aejaz, CEO and Co-Founder.
“Breach was created to leverage our unique expertise in both crypto and insurance industries to be a critical advocate for the crypto market that desperately craves regulated insurance solutions. We will be using this fresh round of funding to grow our team and to further develop the Breach platform and developer tools.”
Recent estimates place the digital currency market at a value of $1.72trn and, while price volatility is a well-known aspect of the industry, the long-term appeal of these assets appears to be secure.
As such, the need for insurance to embrace a new set of customers is highly desirable for both parties. In Rogers’ view, Breach’s innovative approach is filling a valuable gap in the market:
“Existing insurance policies often neglect to cover areas of real risk and serve mainly as marketing tools for crypto companies. Eyhab and the Breach team have the insurance background and technical expertise to finally bring effective, scalable coverage to individuals and businesses in our industry.
Image of dashboard sourced from Breach's website
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.