The Role of Cryptocurrency in Paying Insurance Premiums
Insurance has existed since the 12th century, with premiums largely fiat-dominated. However, as societies transform into digital-dominated ones, traditions are changing.
Digital assets play a significant role in society, as the advancement of financial technology has predominantly benefitted from the growing use of cryptocurrency. While crypto still dominates trading platforms such as PrimeXBT, which also offers oil trading, companies supporting their transfer from one trader to another focus on the underlying infrastructure. Many insurance firms will want a piece as digital assets become commonplace.
Companies like Lemonade and Guardtime have already integrated blockchain into their insurance claim payments by allowing smart contracts to execute whenever there is a claim. With the help of Artificial Intelligence, the companies make remote verification of insurance claims to enable the release of payment to reach the other party. The development shows the potential of the technology that houses Bitcoin and other cryptocurrencies.
How Long Until Cryptocurrency Can Pay Insurance Premiums
Crypto insurance payments are already here thanks to companies such as AXA S.A. The development will spark a bullish situation for other insurance to follow suit, but it might take some time.
While the likes of AXA make enormous strides towards offering insurance payments using cryptocurrency a reality, some hurdles still exist for valuable companies to make the shift.
Regulatory approval comes to mind when talking about volatile instruments like cryptocurrency and the legality of them being the sole insurance payment instruments. Many markets worldwide are yet to approve insurance covers paid solely in crypto because of their nature. The companies that already do still rely on third-party exchanges, which offer an equivalent of fiat for crypto paid.
The legal hurdles are yet to discourage insurance companies from having a cake of the lucrative cryptocurrency market—the current price deep notwithstanding.
Crypto has proved itself for over a decade, with different coins hitting massive highs at the time of Covid-19 when other investible funds had shut down. Bitcoin reached an impressive price of over $65000 per unit. Other crypto coins also rallied to historic highs, meaning people are actively buying a piece or two to have for themselves.
What Are Some Downsides Of Using Crypto To Pay For Insurance?
Supply and demand curves have a significant impact on the movement of crypto instruments’ prices. The likes of Bitcoin tank as soon as big cooperates, and notable figures show the intention of dumping their crypto assets.
Massive momentum picked by cryptocurrency also has a significant hold on the amount paid by insurance firms. For example, when the markets realize a steep rise in the price of Bitcoin, insurance firms have to pay more for claims made in crypto.
Insurance is not a charity and exists to help the insured return to their former financial position before a loss. However, a sudden rise in crypto prices breaks the existing principle of insurance. The reverse of the situation also means a loss for the insured.
How can Insurance and Crypto Work Together?
The underlying technology that runs crypto can work for traditional heavyweights in the insurance sector. The likes of smart contracts that self-execute are a gold mine when thinking of ways to pay for claims quickly.
In the current dispensation, claims can take up to 45 days. However, with smart contracts, the process can take a shorter time, especially with the introduction of AI to investigate the legitimacy of losses.
Instant payouts are what the likes of PrimeXBT are all about when trading, and when they cross over to insurance, cryptocurrency might find a way to fit into insurance.
The blockchain is an unbreakable chain, and those using it can testify to this. Smart contracts exchanged in the blockchain or written there have a bigger chance of self-execution years later when in the blockchain.
It might take some years for insurance companies to have a significant sense of cryptocurrency in the way PrimeXBT and others in the crypto field have. However, the allure of cryptocurrency, evidenced by massive highs in the past, has seen some insurance firms include cryptocurrency in their portfolio. It will not be long until more firms start accepting cryptocurrency for insurance payments.