How Black aims to fix the Insurance Industry

Stefan Perlebach
Stefan Perlebach

Sep 10, 2018

Interview with Mart Parve - COO at Black Insurance.

1. Which problem is Black Insurance trying to solve?

Can you name the “Uber of insurance” - the company that delivers a 10x improvement over the status quo? … Take your time. Yup, there’s no such company yet. Insurance is stagnant since it is riddled with bureaucracy, regulatory red tape and oligopolies.

Black brings Security Token based crowdfunding to insurance, opening the gates for Ubers and Airbnbs of insurance to come.

2. What is your biggest challenge launching a Security Token?

As you might imagine, the biggest, and possibly the only major challenge is one of regulation. All other issues, such as technical implementations or liquidity from the exchanges are quite straightforward to overcome. However, based in Estonia, we see quite a bit of encouraging signals from the government that good actors will be accommodated in their Security Token efforts. Security Tokens are the future, and many governments will come along in the fear of missing out.

3. Why did you choose doing a STO as a means to raise funds?

First, we aren’t selling Security Tokens on the upcoming ICO - on the ICO it will be good old Utility Tokens. However, once operational, we are all about Security Tokens.

Black Insurance is the first company to bring crowdfunding to insurance industry. Let me explain. Behind every insurance policy, there is a mandatory ~40% reserve capital in place, in simple terms money in the bank on the insurer’s side to backstop losses if there are more compensations paid than premiums collected. This capital is what earns the capital returns in the insurance game.

Now this capital is currently controlled by a handful of actors - mainly licensed insurers. Regular folks have no way in. We open this investment mode to all investors so that anyone can front a piece of such reserve capital, and earn the profits. When we analysed how to make this investment mode as frictionless, liquid and convenient as possible, the Security Tokens approach won hands down.

The Security Tokens will essentially represent the accompanying portfolio of insurance policies. Any eligible crypto investor can purchase such tokens, and if there are more premiums than claims in the respective portfolio, then there are profits and the investor gets a share of these profits. You can think of these tokens as shares in an insurance company dealing in a particular region or insurance product line.

4. What are my rights and risks as an owner of your token? Are they different from traditional ownership rights/risks?

The Black Security Tokens (BST) will represent a share in the reserve capital of one particular insurance scheme. There will be an unlimited number of BST-s: BST1 might represent motor insurance in Africa, while BST2 could be drone insurance in Canada. If the insurance scheme is profitable, the token holder is eligible for sharing the returns from the scheme. That’s her main right, this forms the very essence of the BST token model.

5. Who is eligible to purchase your tokens?

As you all know, securities regulations vary wildly across jurisdictions. In EU, it’s somewhat more relaxed, and we’re hoping that US will finally also open itself for market forces, instead the mess of red tape that it’s now. So, on a jurisdiction / country basis, there are different KYC/AML, compliance and accreditation requirements, and we intend to comply with all.

6. When will I be able to sell / trade your tokens? On which exchanges?

We intend to issue first BST tokens next year, and by that time, the landscape will have definitely changed, to be more accommodating is our guess.

7. What was the biggest learning you made during the last year?

The industry incumbents are really avid about joining the blockchain and crypto revolution. The most traditional companies of one of the most traditional industries (insurance) seek out startups from this emerging scene, and have proven to be agile partners. I’ve been following tech closely for about 20 years, and it’s the first time I see such support and curiosity from the big old lazy cats.

8. What would you recommend others, who are planning to do an STO?

Have a strong underlying business case, one where the advantages of crypto really come into play. I expect to see tokenized property funds, startup financing etc.

9. Where do you see the Security Token Ecosystem in 5 years?

There’s a saying that people overestimate the short term change, and underestimate the long run. I expect Security Tokens to be no different. In 5 years, it will be something like crowd equity or P2P lending today - a thriving, quickly growing business, proving new use cases and benefits. However, from then on the hockey stick curve picks up the pace, and in 10-15 years, the securities scene will have completely changed. In 5 years, the Googles and Apples of this next revolution will have valuations in around 100-200 billion dollars - and that’s before the “hockey stick” kicks in.

10. Who is your favorite super or real-life hero?

To be honest, I don’t believe in heroes. By the end of the day, good outcomes rely on teamwork, system and resilience. Look at the superhero movies - they step in only when things have gone completely south. Heroism is a bandaid, not a reliable solution.

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