How We Can Make Insurance People-Centric And Fair Again
Insurance was once born out of the necessity to manage risk. People knew that uncertainty was a major part of life and none of us was adequately prepared to face it on their own. But we learned that if we cooperated, we could minimize the negative effects of uncertainty and share the positive ones. Insurance became our way of putting the future at the service of the present. The better it worked, the bolder we could be in pursuing our goals and dreams.
As time passed, things changed. Stock insurance companies emerged, and for the first time the primary focus of insurance switched from minimizing long-term risk to optimizing short-term financial results. Driven by fierce competition, insurers became more and more profit-driven. This naturally made them centralized — being run in a top-down manner by a few people allowed companies to be very efficient at cutting costs and bringing in revenue. But along with efficiency, other things started to change as well.
Claim payouts, which were meant to protect us from uncertainty, became uncertain themselves. People started doubting their risks were actually shared and covered. The more profit-centric insurers became, the more payouts were considered financial loss by the company, which meant there was an incentive to reject or delay claims. Transparency was no longer an advantage, but an obstacle. The less shareholders and the outside world knew, the more insurance companies were free to decide how to deal with policy money. Risky investments that promised higher ROI became common, forgetting insurance was here to provide exactly the opposite — risk management for the people, not for insurers.
All of this culminated 10 years ago, when insurance giants AIG were found insolvent after having invested their policyholders’ money in high-risk financial instruments. The U.S. government rescued the company by injecting the unprecedented $182 billion in what would be the largest government bailout of a private company in U.S. history. Had it not intervened, the entire global economy might have collapsed. This short episode was the financial equivalent of the Cuban Missile Crisis.
Today companies like AIG remain just as non-transparent. Risky investment of policy money is still the norm. Regulation happens after things have gone wrong, instead of before. Since the 2008 scandal, 16 life and health insurance companies have gone out of business in USA alone. If a single insurance company made the entire world economy so vulnerable and things haven’t changed, we’ve only postponed the catastrophe. What’s worse, the current system leaves people no way to mitigate the risks to their health, property and businesses. Someone always pays when risks manifest. If insurance doesn’t work, it’s either clients by going bankrupt or taxpayers by subsidizing bailouts like AIG’s. It’s no wonder trust in the industry and customer satisfaction have hit an all-time low.
But insurance is not just a business, it is a cornerstone of our economy and society. If we let profit decide how we manage risk, spend money and handle claims, we will always have people working for insurance instead of the other way around.
Imagine an insurance that is people-centric rather than profit-centric. One that is governed, possibly even owned, by the community. One that is transparent so that everyone knows how their money is used. Insurance that is decentralized in the key aspects of claim handling and payouts to neutralize the massive conflict of interest that profit generates. One that is built on immutable trust — trust in the system, not in a single company or person. We believe we know how to make this vision reality.
The Colibra project is an effort to guarantee that insurance works in a way that benefits everyone. We’ve gathered professionals and community members to work on the democratization of the industry and to help them, we have devised a short set of principles to guide everyone in the process:
- People-centricity. We believe people are more important than profit. More than just clients or customers. More than numbers in a spreadsheet.
- Fairness for everyone involved. We believe insurance needs to provide justice for people and companies alike. Only then trust in can return.
- Radical transparency. We believe a good insurance company has nothing to hide. People should be free to always know its solvency and investment practices.
- Crowdsourcing key decisions. We believe claim handling and payouts generate almost all conflict of interest in insurance. Making sure no single person or entity can affect them guarantees rules can’t be broken.
- Continual improvement. We believe insurance is a work in process and we need to always look for new ways to improve it. But just as importantly, keep what’s working.
- Focus on user-friendliness. We believe automation and personalization have the power to finally make the insurance process instant, effortless and fun.
- Community effort. We believe insurance needs to be driven by the community if we really want it to work. This way, we will all share the risks, responsibilities and rewards.
This is why Colibra is building the first democratic insurance company in the world. We’ve started by developing an innovative open crowdsourced platform for decentralizing insurance claims. This platform will allow us to crowdsource the crucial claim handling to certified, independent users that will verify and vote on each claim. Once the crowd jury decides a claim is eligible, a smart contract instantly triggers a payment towards the client.
Insurance companies today have no meaningful downside. The more risks they take with our money, the higher their potential profits. Whenever they fail, we pay. We think it’s time for a change. If you, too, believe that instead of wealthier companies we need higher autonomy, more transparency, better risk-management and greater peace of mind, join us on our journey. Help us rebuild insurance in a way that works for all people.