How a possible IPO could impact the insurance industry
By Insurance24
HARARE, R3, a blockchain-software company that works with more than 200 heavyweights such as Intel Corp., Microsoft Corp., US Bancorp and Wells Fargo & Co., is considering going public, a decision that could have a diverse array of implications for insurance firms and other companies in the finance sector.
The company is speaking with advisers about an initial public offering, although no final decisions have been made, according to people familiar with the matter, who asked not to be identified because the deliberations are private. It has also been approached by potential buyers, one person said. Founder and CEO David Rutter, along with R3 investors such as Intel and Bank of America Corp., will decide its course.
R3 is working to deploy blockchain applications that could lead to lightning-fast money transfers and loans with new features. Businesses involved with R3 also include ABN Amro Group NV, Barclays Plc, Bain & Co., Bank of New York Mellon Corp. and Deutsche Bank AG.
For now, R3 hasn’t settled on a plan. “We’re not surprised about the speculation given the success of Corda, but an IPO is not a path we’re pursuing at this time,” the company said in a statement. “Our mission from the start was to deliver a blockchain solution for the widest possible business community, and any decision we make will have that goal in mind.”
New owners, whether they are public investors or an acquirer, would have a big say over which features and capabilities R3 develops next. Depending on who the buyer is, some R3 users may no longer feel comfortable using its software. Goldman Sachs Group Inc. and Banco Santander left the group in late 2016. The company said more than 20 additional banks have begun working with R3 since then.
R3, with offices in New York, London, Singapore and Brazil, is considering its options as the blockchain software market revs up. A Deloitte survey of 1,000 global executives earlier this year found that about 34 percent of companies already have blockchain systems in production, while another 41 percent expect to deploy the technology in the next 12 months.
Because blockchain technology can offer advantages such as faster transaction times, companies that fall behind in deploying it could suffer financially.
An open-source version of R3’s Corda software is already available. More recently the company began offering a commercial version with 24/7 customer support and additional features. R3 doesn’t comment on profitability, but is already seeing “significant revenue,” officials said. R3 has about 180 employees.
Other banks, such as JPMorgan Chase & Co., have been working on developing blockchain independently, although earlier this year Reuters reported JPMorgan is considering spinning off the project into a standalone company to increase its appeal.
Decentralized P2P insurance network threatens tsunami of change
By Insurance24
HARARE, A wave has stirred in the insurance ecosystem which has the potential to cause a tsunami of change. Decentralized, peer-to-peer (P2P) insurance has arrived.
Tides is a distributed network of P2P insurance, through which all the functions of an insurance company are decentralized. Tides’ networks place risks and premiums together into completely transparent pools. Premiums are priced by a network of actuaries voting through Tides’ consensus protocol, and claims are verified and paid via a decentralized network of oracles.
The network is initially tackling health insurance, which Tides founder and CEO Chandra Duggirala described as “completely broken”. He said: “In health insurance, there are three key problems: adverse selection, information asymmetry and incentive misalignment.
“Insurance companies are incentivized to maximize their revenue by raising premiums and minimize expenses by not paying claims. They also tend to construct policies that are difficult for most consumers to understand and they sometimes obscure information to keep consumers in the dark. All of this misalignment can be solved by the distributed, decentralized route we’ve taken.”
Tides’ value proposition is that instead of an organization or employer paying out huge sums of money to insurers or third-party administrators to establish a health plan, they can invoke a Tides pool, submit data to a Tides actuary, get premiums priced, and create a smart contract within a few clicks. Tides protocols are the same for each pool, but the employer or pool organizer has the ability to set additional rules to their specific pool.
In traditional insurance models, employers typically don’t have any say over what is done with excess premiums paid into the healthcare plan. With Tides P2P insurance, unspent premiums are treated as savings and are either rolled over into future coverage or returned to the employer. This enables employees to be “judicious of how they spend their money with the health program,” according to Tides founder and COO, George Burke.
This type of decentralized P2P insurance network paints a whole new picture for insurance carriers and brokers. Tides recently announced its first partnership with parametric health insurance provider, RainShine, whereby RainShine will administer a Tide pool of gig economy workers. By taking on the function of administrator, RainShine will get an allocated share of the insurance premiums.
“The Tides system is designed to reward people who pump more demand and services into the network. Those who do more of the work will get more of the rewards. There is no arbitrariness allowed, and all rules are followed by the employer, the insurer and the consumer,” Duggirala explained. “In the future, additional roles will become available. For example, the insurance broker could become a pool administrator. Even though their role as a conduit of information will disappear, the broker will have a new administrative role where they will eventually be able to make more money if they drive lots of demand into Tides.” InsuranceBusinessAmerica
