As the world becomes more digital and virtual by the hour, some of the oldest professional industries struggle to keep up with the state of technology in today's world. Insurance providers have always had to have a personal touch, but as computers continue to take over consumer use more and more, they need to adapt to the changes in the market. How people pay is also changing, for people and businesses, with Bitcoin digital currency. This was a key topic of discussion at the Risk and Insurance Management Society (RIMS) 2015 Conference in New Orleans last week.
Insurance Industry sees The Dark Past of Bitcoin
As the saying goes, the night is darkest just before the dawn, and Bitcoin has seen many dark times over the last eighteen months, from Mt. Gox to Silk Road. This brings pause to many companies in the insurance industry who see the power of what Bitcoin can do, but fear its potential for calamity in the wrong hands. Who knows if the dark days of Bitcoin are truly behind it? Yet, it also attracts the optimistic opportunists, and it is still growing and attracting venture capital and global interest.
“Many (insurance) carriers remember that when Bitcoin began in 2009, it was first used for the purpose of buying any drug you could think of, or to pay for murder for hire; some really bad stuff,” says Ty Sagalow, CEO and founder of Innovation Insurance Group tells Insurance Journal.
Insurance carriers also see the potential for new markets to open when it comes to insurance options for Bitcoin users, but are limited by their lack of knowledge of the technology. There are a few policies for markets like Bitcoin theft insurance, but the ones available are pricey due to lack of competition.
“I honestly believe that Bitcoin is the cutting edge of where monetary systems may be going,” says James Kirtland, vice president of corporate risk management for Voya Financial Inc. “The biggest hurdle we have is, we don’t know enough about it.”
One potential issue as Bitcoin goes mainstream is the loss of keys. Bitcoin is similar to a safe deposit box you would hold at a bank or post office. You can only access your valuables with special keys provided to you. There hasn't been a great call for insurance on safe deposit boxes since the location has a master key for you to gain access if you lose your key. Bitcoin doesn't offer you that in its nascent state. You would have to provide a third party access to your wallet, defeating the purpose of the digital currency. If you lose your private key, you are out in the cold.
“A person could lose the thumb drive that has the private key on it, and then they are no longer able to unlock their Bitcoin wallet,”said Robert Parisi, managing director and national Cyber Risk Product Leader at Marsh.
Just like with the Internet twenty years ago, Bitcoin will attract smaller businesses looking for a cutting edge advantage over industry leaders. The internet didn't have search engines and social networks in 1995, but innovators and visionaries found a way to provide the market with the tools it needed. Bitcoin is the 21st century's next frontier, and extension or app of the Internet and is expected to follow the same growth model. Bitcoin insurance will be a big part of Bitcoin's future. I guarantee it.
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Last modified (UTC): May 5, 2015 7:55 AM