Blockchain is breathing new life into the financial industry, with banks, payment networks, money transfer systems and even asset exchanges exploring new ways to adopt distributed ledger technology. Although the value proposition of blockchain is generally known to the big banks, its utility in the insurance industry is only now being understood.
Research from PricewaterhouseCoopers (PwC) shows that 56% of insurance companies already recognize the value of blockchain, yet 57% do not know how to adopt the new technology.
PwC goes on to state that the blockchain offers significant advantages to the wholesale insurance industry, including reducing costs, generating instant access and legal certainty, minimizing reputational risks and ensuring there is no single point of failure.
InsurePal offers a unique blockchain solution for the insurance industry, with an aim to go above and beyond existing market capabilities. According to the company’s whitepaper, the project seeks to replace the insurance industry as we know it, beginning with business transactions:
“InsurePal will replace the insurers’ model as we know it today, and at the same time offer a completely new type of coverage for areas of life and business that began to emerge with the evolution of blockchain and the transactions being carried out on the distributed ledger.”
In essence, InsurePal is developing a peer-to-peer insurance platform. The projects identifies peer-to-peer business models as the single biggest threat facing the insurance industry as we know it today. The premise behind this is compelling: responsible people overpay their premiums at the expense of other, less responsible people. Through a peer-to-peer crowdsourcing model, insurers can share each other’s risks with everyone contributing money. This also reduces the need for an expensive middleman to administer the process.
As you will soon find out, InsurePal is a very popular project. The key question for investors is whether the peer-to-peer business model presented in the whitepaper is strong enough to transform the insurance industry.
InsurePal is issuing an ERC-20 compliant token called IPL. As a utility token, IPL will identify and tokenize insurance assets, as well as digitize their record. The token will then be used to support the following business functions:
- Insurance of blockchain business transactions
- Premium insurance discounts
- Upfront incentives
- Social proof identity
- Claims adjustment
The pre-sale was a resounding success, with the company easily reaching its $12 million target. The project still needs to raise $6 million through a publicly-funded initial coin offering that will commence Jan. 15.
InsurePal’s team has no shortage of talent. With a solid management group in place, the project will lean heavily on nine advisers. Based on the team bios, domain knowledge of blockchain will come largely from the advisory board.
Investors will be happy to note that InsurePal has seven dedicated developers working on this project, including two blockchain experts. The author has zero hesitation about the team’s capacity to deliver.
The marriage between blockchain and insurance has a lot of people excited. InsurePal’s project has a lot of potential and is serving a good cause. Most readers would agree that the insurance industry is in dire need of reform. Blockchain is perhaps our best bet for making it happen. That being said, there are important risks to consider before investing.
- InsurePal’s target market is lower-risk customers who are (I assume?) unsatisfied with their existing insurance premiums. However, it is usually these customers who have the lowest premiums already. Although the company claims it can cut their premiums by up to 50%, there’s no explanation in the whitepaper about how this metric was calculated. -1
- Although InusrePal faces limited competition from insurance providers directly, the budding world of ‘insuretech’ is a different matter entirely. Like fintech, insuretechs are providing solutions to the traditional financial industry, and are increasingly tapping in to a more digitally savvy consumer base. According to research from McKinsey, insuretech startup funding has grown manifold in recent years, from $270 million in 2013 to $2.7 billion in 2015. The insuretech industry isn’t touching social proof; in fact, InsurePal has patented the idea. One has to wonder whether the billions of dollars flowing to insuretech startups will yield better results than one based on social proof (as the next bullet point illustrates, the author isn’t entirely sold on this business model). -1
- Some of the use cases provided by the whitepaper are less convincing from a business perspective. The idea of bringing your close friends into a business relationship where success is based on social proof has trouble written all over it. Although social proof has been studied, will it be a viable business model? The author isn’t so sure. -2
- The whitepaper talks about self-regulation, but doesn’t seem to address the complex regulations governing the insurance business (not to mention how these laws differ around the world). At the same time, an individual’s risk profile is based primarily on social endorsements (in other words, positive reinforcement from your social network). But what happens if a user does not receive those endorsements? Are they without insurance, or will their premium rise? -2
- If the pre-sale is any indication, the public ICO should very easily reach its target. With two-thirds of the hard cap already attained, the rest of the crowdraise will likley go very smoothly. This raises the question of whether the current fundraising goal is too modest, as there will be a rush to acquire IPL later this month. +3
- Insurance is a $7 trillion global industry, and existing market providers don’t appear willing or capable to adopt peer-to-peer models (they also don’t know how to use blockchain). This means the project is fairly well positioned to disrupt the traditional insurance market. +3
- The peer-to-peer insurance model will probably appeal to digitally savvy millennials, who until now have been the least likely to insure. This presents another opportunity for the project to tap into a potentially high growth segment. +2.5
- Regardless of how we feel about social proof-as-a-business, InsurePal is an early blockchain adopter in an industry starving for scalable, cost-effective solutions. +2
- InsurPal’s team is as solid as they come. With overall vision from the founders, the executive team provides the insurance market expertise and the advisers the blockchain know-how. A seven-strong team of developers also raises our confidence that the project will be implemented as promised. +2
Factoring in all the above, we’ve assigned InsurePal a score of 6.5 out of 10. Although the author has some reservations about the business model, the team, project specifications and early investor interest suggest this could be a really successful project.
- Token Type: Utility
- Platform: Ethereum
- Symbol: IPL
- Initial Value: $0.10 USD
- Total Supply: 300 million
- Pre-Sale: Sold Out
- Public Sale: Jan. 16 – Feb. 5, 2018
- Available in Crowdsale: 201 million (67%)
- Jurisdictions Barred from Participating: U.S., Canada, China, Korea