During 2017, Blocksure undertook a survey on the use of cryptocurrency in insurance. Read the results here.
During 2017, Blocksure undertook a survey on the use of cryptocurrency in insurance. Approximately 500 respondents provided fascinating insights into the perception of cryptocurrency’s current usefulness in insurance. We are very grateful to those who participated, so thank you!
Firstly, some stats. 60% of participants were individuals aged between 21 and 30 (Figure 1). What does this say about that age group? More technologically savvy? More likely to invest in riskier assets? Less likely to take out insurance in its current formats?
61% of participants have bought travel insurance but, despite almost half owning 5 or more gadgets, only 35% of people had ever bought gadget insurance (Figure 2). Interestingly, 85% of participants would buy gadget or travel insurance using cryptocurrency.
However, two key reasons for not using cryptocurrencies to buy insurance were found. Many pointed to its volatility (44%) and 21% explained that they saw their cryptocurrency as an investment and not yet for day to day spending. In addition, this answer highlights concerns that many participants had:
Buying crypto often comes with fees and can be a bit tricky, which is a pretty strong incentive not to use it for everyday spending. Any product like this would need to have a clear USP or saving to get over that for me.
Of the participants who would buy travel or gadget insurance using cryptocurrency, 85% would also be happy to buy other insurance with it (Figure 3). Of these early adopters, 16.5% said they would consider buying all types of insurance using cryptocurrency. They pointed to the importance of this adoption in order for the public to reap the benefits of decentralised systems and insurance.
There was a resounding opinion that the volatility needs to settle before this is a viable pathway. As one participant put it:
I feel like [buying insurance] would be a waste of BTC cryptocurrencies in the current unstable financial environment it is in.
Finally, only 17% of participants would accept a pay-out in cryptocurrency, if it was the same cryptocurrency that the premium was paid in. Participants had many arguments for this (Figure 4), but frequently highlighted that it was fair to receive a pay-out in the currency the claim was paid for.
I can see insurance companies getting away with paying in an unstable cryptocurrency to avoid high fiat value pay-outs.
A key reason for not receiving a pay-out in cryptocurrency was the difficulty in converting to fiat (27%), along with concerns over the currency’s volatility (37%) and that it is not yet widely accepted.
We understand the concern around price volatility and the desire to invest for the potential of future gains. Over time, as cryptocurrency reaches mass adoption the volatility should subside to levels similar to traditional currencies. In the meantime, there are potential ways that insurers can share the highs and lows of cryptocurrency volatility with customers. For example, when currency values increase the future cost of insurance could reduce for claim-free customers or insurers could build a reserve pool to protect customers from a drop in value of the cryptocurrency.
In a future where the price is relatively stable it seems as though a large percentage of respondents would at least consider paying premiums with cryptocurrency. We also agree that the process of acquiring and spending cryptocurrency is still quite complicated, so this is something that the industry will have to overcome.
Regarding transaction fees, there are already fees associated with transferring any money electronically; at the moment this additional cost is not usually made apparent to the buyer. The transaction fees on some blockchains are already less than that of traditional payment providers, so this should not be a major concern.
Blocksure is committed to making insurance better by improving the customer experience and building the most efficient systems for the industry to use. We will use these results to guide our industry customers in their transition into a blockchain world.
Thank you to everyone who has taken our survey!
If you are interested in using Blocksure OS to build a blockchain based insurance business then please get in contact.