If there is one thing that’s certain in life, it’s uncertainty. Uncertainty has such an impact on our lives that how we deal with its manifestations and its negative effects determines our progress as individuals and as a society. People realized long ago that а single person, family or business cannot bear uncertainty alone. We naturally joined forces to share the risks today so we can be safe in the uncertain tomorrow.
This is how insurance was born and that’s why it’s so important — it’s our way of putting the future at the service of the present. The better it works, the bolder we can be in pursuing our goals and dreams. Throughout the centuries insurance has played a pivotal role across cultures and civilizations. Having one’s ships insured and being certain their value is covered gave one the peace of mind to take on more risks — like building more ships or going further to explore new markets.
However, insurance was built upon two principles — trust in the underwriter & certainty of claim payouts. Together they guaranteed that risks were actually covered. As time went on, faith in those principles eroded which meant we started doubting one of the most important pillars of our society.
THE PROBLEM WITH INSURANCE
The reason for this erosion of trust has a name — conflict of interest. Its roots can be traced to the principal-agent problem in economics — a situation where one party (the insurer) can act on behalf of or impact the other party (its clients) but is driven by different interests. The Principal-agent problem not only generates conflict of interest but seriously raises the moral hazard — the possibility of the insurer exposing itself to more risk because it’s the clients and the taxpayers who bear the cost of this risk. AIG’s bailout back in 2008 is a vivid example of this dangerous trend in action.
As time went on, the main goal of insurers was no longer to just help people minimize uncertainty and share risk. The industry became increasingly profit-driven and focused on short-term financial results, rather than long-term risk management. Insurers became more and more centralized — this allowed them to be very efficient at cutting costs and bringing in revenue. Being profit-driven and centralized meant they had both an incentive to delay or reject claim payments and the power to do so. Every day of delay earned them an interest, while every unfair claim rejection was considered direct profit. Fairness and user-experience deteriorated. Non-transparency became the norm, creating even more moral hazard, as it increased the information asymmetry — clients not knowing how policy money are spent and how much of them is available at any moment.
Today, insurers are much more investment companies that manage their shareholders’ profits than insurance companies that manage their clients’ risk. Insurance policies are just the way they finance their investments.People are no longer certain they are protected from uncertainty. As we’re talking about an industry built on trust and certainty, fewer people will use insurance to neutralize the risks to their health, business and property. The numbers prove it — many bankruptcies, bailouts and denied claims later, trust in insurance companies has hit an all-time low.
WHAT IS COLIBRA
The Vision Behind
The Colibra project is an effort to restore trust in the industry by building a new type of insurance that benefits everyone — companies and people alike. We believe democratization holds the key to changing the flawed business model and putting people back in focus, instead of profit. We’ve gathered professionals and community members to help us create the first democratic insurance company in the world and the first domain is to try how it works is Travel insurance.
Crowdsourcing What Matters
Colibra is developing a platform for crowdsourcing claim handling and automating claim payouts on the blockchain. Claim decisions and payouts are the birthplace of conflict of interest and by bringing fairness and transparency to those key processes, we want to breathe new life into the industry. Along with claim handling, another aspect of insurance needs a radical shift towards transparency. Colibra will be the first insurer to make its actuarial reserves fully transparent 24/7 with the help of blockchain. This will guarantee our solvency, i.e. our ability to manage our clients’ risks at all times.
Insurance That’s Quick & Easy
Colibra will also invest heavily in the simplification and personalization of the app to create a user-experience beyond anything that’s offered on the market. Taking a mobile-first approach and using AI to automate and speed things up, We want to make getting insured and filing a claim as quick and easy as chatting with a friend. This will finally turn insurance into the effortless and intuitive process people deserve to have.
HOW COLIBRA IS DIFFERENT
The Traditional Approach
Experts agree we are at the dawn of a new technological era, yet few technologies offer as much promise to disrupt insurance as blockchain. Innovations such as claimless insurance or ledgers like the B3i initiative have the potential to change the way we think about insurance. Nevertheless, traditional insurers have used blockchain only to optimize their business processes, add new features and reduce their costs — that is, merely as profit-drivers. It’s an approach that’s aimed at fine-tuning the current system, instead of looking for ways to change what’s wrong about it.
The Blockchain Approach
Meanwhile we’ve witnessed the birth of blockchain insurance as a new market segment. Blockchain insurers have brought forth new products and business models like parametric insurance (Etherisc), peer-to-peer insurance (Teambrella, InsurePal), insurance data marketplaces (Insureum), among many. The problem with them is that they’re either too niche to impact an industry as big and complex as insurance or they take on the impossible task to parametrize and decentralize the entire business. The truth is the majority of insurance claims will continue to be non-parametric in the foreseeable future due to the scarcity and sensitivity of the data involved.
At Colibra, we have taken an approach that is more holistic. Colibra will focus on non-parametric claims (along with parametric ones), where almost all claims and people’s pain come from, and will concentrate on those areas that generate the majority of the conflict of interest — claim handling, claim payouts and reserves transparency. We believe decentralization and centralization can actually work together to democratize insurance if we use decentralization to bring structural change, instead of incremental improvements or mere profit-optimization.
Colibra will start with traditional products (e.g. travel insurance) but will do this in simple, intuitive and user-friendly way, while using an innovative claim handling back-end to guarantee their fairness. By keeping what’s working and fixing what’s broken, we want to make Colibra the perfect overlap between stock, mutual and blockchain insurance — efficient, yet community-driven and fair. Moreover, our crowdsourced claim handling platform will be open for other insurers to use, giving the innovation potential to catch fire. All of the reasons above make us think of Colibra as the first Democratic insurance company.
HOW COLIBRA WORKS
A Different Claim Handling Model
Traditional insurance claims are handled centrally by a team of company employees, sometimes even by a single employee. This lays the foundation for errors and conflict of interest due to the principal-agent problem. In contrast, Colibra completely crowdsources this process to multiple independent operators and jurors on its open platform. Unlike traditional insurers who have a say in claim handling and payout decisions, smart contracts make sure Colibra does not. Whenever the jury votes a claim is eligible for payment, a smart contract automatically transfers money from Colibra’s reserve into the policyholder’s wallet. This drastically reduces the conflict of interest in the process.
Step by Step
Colibra’s claim handling process goes through a few simple steps. The client submits a claim in the Colibra app, providing document scans and a short video. The app uses OCR to digitize the data and examines the video quality. An operator organizes the information and verifies the claim’s validity with the institution (hospital, police station, hotel, etc). Colibra’s AI uses machine learning and deception detection to analyze the documents and video for potential fraud. The claim is finally sent to a crowd jury who use the platform to vote on its validity, based on the information supplied by the operator, the AI and the client. А smart contract then acts upon the outcome of the vote. If the claim has been approved, a payment is instantly triggered and the client receives their money inside the Colibra app.
Traditional insurers keep their reserves and investment practices private on the pretext of maintaining their competitive advantages. This in fact gives them much more than secrecy — it allows them to make riskier investments, keep a lower solvency than required and deny insurance claims without much explanation. All of those have one goal in mind — maximizing profit. The more transparent an insurance company is, the more accountable it needs to be to its clients about the way it makes use of policy money.
Colibra, on the other hand, will keep a radical financial transparency — something practically unseen in modern insurance. Every time a policy is purchased, a claim payout is triggered or an investment is made, Colibra’s actuarial reserves and all relevant financial data will be updated in real time on the blockchain. This ensures 24/7 visibility and guarantees people the peace of mind that their insurer is always solvent.
The necessity for Colibra to have its own crypto economy stems from the need to use smart contracts to make payments on the platform automatic and autonomous. Transactions on the blockchain are currently not possible in fiat money, yet risks are always evaluated in fiat. The only way to go around this problem is by using а stablecoin to bridge the realms of the fiat world and crypto. Our stablecoin called STALIBRAwill be fully collateralized, redeemable one-for-one to USD (or other fiat currencies) and pegged to Colibra’s fully transparent actuarial reserve.
Тhis will eliminate the price and liquidity risks that traditional and blockchain insurers transfer to their clients. To also address the counterparty risk, typical in insurance, our fiat reserves will be held in escrow as collateral for STALIBRA and will be managed by a banking partner acting as a trustee. This banking partner will be a legally bound and regularly audited asset manager. Our reserves will also be verified by a publicly announced top accounting firm, which will publish regular audit reports.
Before launching the claim handling platform, under conditions that are pre-announced and fully compliant with local legislation, Colibra wants to offer its users the chance to join us on our mission by buying taking part in a security token offering. They will be called COLIBRA tokens.
To maintain an effective crowdsourcing process, those tokens will also have utility functions. We will use them to reward the different participants on the platform for their work, as well as regulate access to the different roles and tasks on the platform. Another use will be having operators and jurors stake a certain amount of tokens before handling or voting on claims in order to raise the standards of their work. Finally, COLIBRA tokens will function as a currency, allowing users to buy insurance policies on a discount, as well as a tool to promote the platform (early adopter incentives, affiliate commissions, etc).
As a side effect of having our own tokens, Colibra will be able to build a deflationary economy, which will act as a great driver of engagement and loyalty for the platform’s users.
If you want to make sure you will not miss the Security token offering itself, visit Colibra’s website and subscribe to our newsletter.
ТЕАМ & ADVISORS
We have gathered a founding team of top professionals that have extensive startup, financial, insurance and tech experience in some of the most prominent business organizations in the world — Google, IBM, Munich Re, Barclays, VMware, Willis Towers, Deutsche Telekom, to name a few.
Heading the team as CEO is Kalojan Georgiev — the founding partner of K-Pharm Global Group, a conglomerate of pharma-trading companies worth USD 100M+. Kalojan has been the strategic financial advisor for deals worth hundreds of millions of dollars, working with governments and top global VCs.
In charge of all technical operations we have our CTO Boris Strandjev who has worked at Google and Musala Soft to develop software solutions for companies such as IBM, Deutsche Telekom and Commerzbank. Boris has a proven track record of designing complex technical solutions with multiple front-end applications and high-availability backend systems.
Realizing the scale and complexity of what Colibra has undertaken, we have also brought on board some of the world’s top experts in fields like business strategy, blockchain architecture, AI, cybersecurity, strategic partnerships, insurance and game theory. Among the projects that Colibra’s advisors have started or are helping their teams run are top-tier companies like Telerik (part of Progress), Chronicle (part of Google X), Viber, LimeChain, VMware, Coca-Cola Hellenic and HyperScience.
Our advisors have given us deep and invaluable expertise in all product aspects. Their knowledge has already helped us improve the front-end and back-end of our product, as well as better evaluate the insurance market, its potential and where current insurance business models are flawed. Thanks to them, Colibra now has a validated concept of our crowdsourced claim handling platform, along with its own innovative business model and its token economy.
Where To Go Next
To know more about Colibra’s vision, read our Democratic Insurance Manifesto.