Insurance in developed countries is still sold in an office with a prime address, offering mostly yearly renewable contracts with a one-fits-all pricing structure.
The future of insurance may look different. You may not have to meet with an insurance agent in a prime office or coffee shop. Instead, insurance will be made available at the tip of customers’ fingers and screens.
Imagine having a QR code at the ski lift which a customer can simply scan and get coverage right away (if the app not already recognises the skiing location and offers the insurance automatically). This can cost you a few cents or dollars, versus buying an annual coverage for hundreds or thousands of dollars. The insurance company will be able to collect data such as the ski location, your basic information, how long your lunch is and if you ride the medium (blue) or high risk (black) slopes from the app. This allows them to provide quick, on the spot and specific products/pricing for you.
More than 73% of Southeast Asia’s population does not own a bank account. Nevertheless, e-commerce is thriving, thanks to innovative payment systems and e-wallets. A physical insurance branch never had the popularity and lacked the trust from the community to effectively sell in a low-income segment. The game changed as soon as a trusted mobile app started to offer services directly on their smartphones. Such apps are known as super apps. A super app means a platform developed by a company offering various services under one umbrella. For example, China’s WeChat, which started out as a messaging app, expanded into payments, cabs, shopping, food ordering, cab services to become a super app.
Super-apps are becoming a crucial part of the insurance landscape in Asia. They benefit from a high user base and high frequency of product purchases, which gives them a huge data pool to price services such as for insurance products. Comparatively, traditional insurers do not have the variety and depth of customer data and are not able to calculate dynamic pricing and underwriting as well as translating customer insights into new product offerings in the same way.
Verso improves the unit economics for insurance companies by standardising how financial products such as insurance are distributed, through the use of distributed ledger technology and smart contracts, to remove intermediaries and the necessity for various counterparty agreements, giving users new opportunities without upfront investment.
The following is an illustrative example of the distribution of a micro-insurance product with Verso. In this scenario, a short-term travel insurance is sold to a customer within an e-wallet. The wallet provider settles the premium and gets rewards for the conversion.
Step 1 – Register Insurance Product. The insurance company develops a product and wants to offer it on the marketplace, e.g. A $10 insurance policy to be offered to 100 consumers. They register the product on the Verso network and define the key criteria, such as product type, product stock, product value, as well as any consumer requirements (age, residency, etc.). The official Terms of Service (ToS) for the product are also uploaded.
Step 2 – Register Campaign Requirements. The insurance company chooses appropriate campaign requirements that include the campaign duration and specifics of what kind of consumers the advertisement should be displayed to. White Paper v1.0 15 Copyright © 2021 Verso Network AG. All Rights Reserved.
Step 3 – Price development calculated by a Smart contract. Based on the input factors of the product and campaign, an algorithm will calculate the price for the placement. This price is based primarily on campaign duration and the value of the underlying products. This fee for marketing the product is ultimately paid into the participation pool in VSO tokens.
Step 4 – Validation. The product will be validated, and validators will receive VSO tokens as a reward. Rewards are paid out from the participation pool that has been funded by the insurance company. The product is now displayed to the wallet providers as a verified product.
Step 5 – Product fetched by e-wallet provider. The wallet provider chooses to fetch a verified product and display it to the end consumer based on the set campaign and product criterias.
Step 6 – Consumer conversion. The consumer sees the insurance policy offered on their own wallet and decides to purchase. In order to do so, the consumer has to accept the ToS of the insurance product and allow the wallet provider to share their personal information with the insurance company.
Step 7 – Insurance premium payment. The wallet provider debits the wallet of the consumer according to their preferred payment method. Consumers can pay with fiat or cryptocurrencies, or any currency their wallet provider supports. The wallet provider, however, sends the premium amount to the product pool in USDC. In addition the wallet provider sends the consumer data to the insurance company for a final verification.
Step 8 – Final consumer Verification. The financial service provider may do a last check of the customer data before approving the insurance. As soon as the insurance provider has satisfied their customer on boarding requirements and the appropriate funds have been made available, the smart contract will be executed and the funds distributed. The insurance company will receive the premium in USDC. VSO tokens will be earned by the wallet provider through fetch and conversion bonuses, in return for marketing the product.
Step 9 – Insurance claim settlement. If the consumer makes a claim for compensation based on the insurance, the insurance provider will settle the case by sending the funds directly to the consumer wallet. The insurance policy agreement is between the insurance company and the consumer. Verso Network is not involved in the mechanics of the insurance policy itself. The consumer receives the settlement in their preferred wallet currency.