It is exciting to hear about cryptocurrency projects disrupting the status quo in many industries and helping consumers save money. One such industry that could use some shaking up is insurance. A project called Umbrella Coin is looking to change the way consumers think about insurance claims. Its goal is to democratize the whole process and provide policyholders with benefits when claim-worthy life events occur. I caught up with the team to ask some questions about the project and the future of Umbrella Coin.
What was the motivation for Umbrella Coin?
“We’re always passionate about disrupting insurance industry,” the team said. They saw the inefficiencies in the insurance industry and wanted to address that. The passage of Obamacare spiked premiums and out-of-pocket spending on the consumer side. For the UMC team, something had to change and they wanted to be that change. After learning about the Blockchain, the team decided to solve “the menace of hidden costs in the insurance industry using Ethereum based technology.”
Are fees and middlemen really the reason insurance premiums cost so much?
“They aren’t the only reason, but paying extra to a sales agent and the administrative costs of processing policies and claims is an easy area to target for improvement with the blockchain.” The team continued, “A big part of high premiums comes from doing risk calculations for higher risk customers. Deductibles increased when insurances couldn’t deny coverage for pre-existing conditions. Another big part is regulatory overhead with regards to compliance matters such as filling tons of paperwork, explanation of benefits, patient privacy.”
The UMC team said they respect the need for the above in order to provide good customer service and user experience, but that there remain too many inefficiencies in these processes. They feel this is especially true for redundant efforts in communication. Smart contracts could help drive down these efforts, and thus the cost of doing business.
Umbrella Coin makes its users both policyholders and insurers who vote on submitted claims. What does the claims voting process look like in laymen’s terms, and how will UMC drive engagement to achieve a quorum on each vote?
“We’ll try to build a reputation-based system to increase voting-based engagement,” the team told me. That system lies a bit further along their road map, though. They elaborated on their immediate plans:
“As of now, we intend to randomly choose a sample of the population for voting on a given anonymous policy and give them a window to vote in (if they can’t, [they] just notify us). Good behavior gets rewarded, negligent behavior has punishment. This also takes care of the problem of rigging the votes, as the individual voters have no control over who they vote for and protects the claim owner’s privacy.”
If UMC holders act initially as insurers and policyholders, what incentivizes them to pay out a claim?
“Ideally, we’d want everyone to know we’re trying everyone on our end to keep solvent, so denying someone else’s legitimate claim doesn’t help their claim in any way.”
However the team recognizes that this may not address everyone’s concerns, so they plan to introduce rewards and punishments.
“We intend to provide some incentives in the form of reduced cooling period, increased maximum amount attainable for good “citizens” of our democracy who execute their civic duty in a timely manner and with good results.”
The team gave me a glimpse of what that might look like.
“For every user, we’d be storing their voting history and would tally it against the outcome of the vote in smart contract itself. If there’s a sharp discrepancy in the alignment of results over a sustained period, we’ll notify the user with a warning.”
This is a really interesting way of encouraging good behavior from users, and the team told me that they may implement a “reputation” scheme in their ecosystem at some point as well.
Would this model work well outside of the U.S. in countries that already have single-payer healthcare? Does UMC want to venture into other kinds of insurance as well?
“Yes definitely we will cover other kinds of insurance. In fact, the name Umbrella Coin is a wordplay, on one side it means ‘for the rainy days’ and on the other hand ‘the one umbrella for all kinds of insurance’ rather than having a separate one for everything.”
While Umbrella Coin hopes to take on the monopolies in the U.S. healthcare industry, it is far from the only part of the industry they intend to augment, and the U.S. is only one of the countries they feel they can help.
“We’re a diverse team with members who’ve lived in Australia, India, Vietnam, China, Puerto Rico and they provide a good background for expanding our operations outside US to give a good understanding of local markets.”
How does UMC fit into the complicated legal world of insurance, either nationally or on an international scale?
“I’d repeat we’re not insurance, and don’t intend to be soon. We’re complementing them… Since we’re not providing proof of insurance or the same contractual obligation of traditional insurers, we are more insulated from this [insurance regulations] in the short term,” the team explained.
“Our mantra is to get out there and disrupt, make the customers happy, and work with the regulators in ensuring customer privacy and security.”
What do you feel UMC will do for the insurance industry in the next ten years?
“First, it’s going to encourage lower fees and reduced overhead… second, and hopefully because of the reduced overhead, some of the traditional out-of-pocket expenses when filing claims will be lessened or eliminated entirely.”
Umbrella Coin’s team was optimistic about their role in defining the future of the insurance industry:
“The long-term goal for UMC is to automate most of the insurance process today via artificial intelligence and machine learning. We’re going to work on driving down costs even further, while increasing efficiency of the pipeline.”
Overall, this is an incredibly cool project with a great team that is looking to make waves in an industry in dire need of innovation. Their collective experience, ambition, and overall attitude sets them up to be a potentially disruptive force in this industry.
Check out their project here: https://www.umbrellacoin.org/
Read their White paper here: https://github.com/umbrellacoin/umc/blob/master/documents/UMC.pdf