Insuranceciooutlook

Why Insurers should Consider Cryptocurrency Insurance?

By Insurance CIO Outlook | Monday, November 25, 2019

Providing insurance coverage to cryptocurrency is gaining market value as digital assets go mainstream.

FREMONT, CA: Insurance companies have a chance to engage a new category of customers by providing cryptocurrency insurance. The popularity of cryptocurrency is growing. Along with that, the risk factor associated with cryptocurrencies is also on the rise. On many occasions, hackers have targeted cryptocurrency exchanges and dealers, necessitating risk transfer mechanisms that the insurance industry can offer. Cryptocurrencies can be insured just like any other commodities for which insurance companies offer policies. While most insurance firms are still considering the move to introduce insurance products for crypto, some leading companies have already invested in this direction.Top Insurtech Startups 

Cybersecurity issues are the key reasons driving the demand for insurance coverage of digital currencies. According to a research report, cryptocurrency worth $4 billion was lost to fraud in 2019. Thus, it is evident that companies and individuals offering cryptocurrency-related services require a way to protect their business and transfer risks. Otherwise, there are chances that cryptocurrencies will continue being unstable and unreliable. Insurers are in a position to leverage this demand and offer insurance policies so as to make crypto-based businesses sustainable.

Crypto insurers today have a hard time while making investment decisions. Despite the potential that cryptocurrencies have, trading is limited. By providing an insurance safety net, insurance companies can help make digital currencies valuable and safe. This will make crypto exchanges profitable. The profits will translate into higher revenues for the insurance industry.

One of the challenges that the insurance industry is facing as it considers offering insurance to cryptocurrencies is that of regulations. Clear policies and frameworks regarding cryptocurrency trading and transactions are yet to arrive. This makes it difficult for insurers to underwrite the risks associated with digital assets. Insurance companies depend on standard regulations to define risks and offer compensations accordingly. Unless insurers have a way to classify risks, calculating premiums also becomes complex. 

However, insurance companies can start acquiring the technology and resources needed to design and deliver insurance for crypto. With the right know-how, insurers will have a competitive edge as and when they start offering cryptocurrency insurance. The upcoming opportunities for crypto insurance are indeed very promising.

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