Umbrella Coin believes the insurance industry is ripe for disruption and is building a blockchain-based model for providing risk management for businesses and individuals. The decentralized platform will avoid the management costs and fees associated with traditional insurance companies.
UMC’s goal is to decentralize benefit payouts and give power to policyholders. The company plans a crowdsale August 20 to October 20 for tokens to allow coin holders to submit and make claims.
Total net premiums for property/casualty (P/C) and life/health (L/H) insurers was about $1.2 trillion in the U.S. in 2015. In comparing net premiums with net profits, UMC believes there is a $100 billion opportunity to remove middle men and end overpaying for coverage. In addition, policyholders’ deductibles and other hidden costs deliver even greater overhead in attempting to make claims.
Insurance is sold based on perceived risk of the policyholder. Actuaries assess the risk factors and determine the acceptable rate. Policyholders are viewed as a greater liability and are forced to pay more based on perceived risk or prior claims. In the event they don’t make a claim, their premium provides considerable profit to the insurance agency with no monetary gain for the policy holder.
Insurers pool funds from policyholder premiums and invest them in commodities like bonds, stocks, precious metals and possibly cryptocurrency. They therefore collect the growth and interest on policyholder money as opposed to the policyholder themselves. This, coupled with high premiums, means policyholders stand to lose on both their premium cost and what they would collect in interest.
The pooling model causes the insurance industry to crowdfund funds needed to pay claims while serving as overhead for the funds.
When government mandates are coupled with the insurance business model, policyholders lose an even larger share of their income at the expense of the insurance companies.
UMC believes it can make an impact on deductibles, co-pays and co-insurance while it establishes its financial base.
UMC will operate with coin holders who will act as both insurer and policyholder, combining the role of the traditional model. UMC policyholders will initially pay a benefits package for life emergencies.
UMC’s initial release will have users create a benefits package by spending UMC on the network. The value is added to UMC’s float and immediately invested. This allows the user to submit a claim for five times the amount of the policy, with certain restrictions. Users will not be able to submit claims for the first 90 days.
Users will be eligible to withdraw their unused policy funds at no charge after 365 days, if there has not been too much paid out from the shared fund.
A policy created by a coin holder will be tied to their wallet address. A claim has to be made against a certain policy. A policyholder cannot make a claim against a policy not associated with their address.
Claims will have to be judged by the community to be approved or denied. Users will be required to submit at least two pieces of information when making a claim, and the community will be given a board to discuss it.
To prevent overdrawing, UMC will have a maximum payout for exchanges. UMC will only cover a certain schedule of benefits initially as the benefits are less imposing and do not require the full adoption of UMC as a viable insurance alternative.
The main product to be developed during the crowdfund will be the infrastructure and client for exchanges, penalties, fees, voting and claims. Following this, UMC will explore marketing the product to existing agencies that accept claims directly, and will expand into different areas.
The crowdfund runs from August 20 to October 20. The total sales goal is 100,000 while the minimum is 5,000 ETH. There will be 100 million tokens issued. The first 5,000 ETH gets a 100% bonus to tokens, making the rate 1ETH to 1,200 UMC.
The minimum transaction is 60 UMC to 0.1 ETH. The maximum transaction is 1.8 million UMC to 3,000 ETH.
All collected funds will be received and stored on wallets with multi-signatures.