Is cryptocurrency property? If so, can you insure it? With the rising popularity of cryptocurrencies such as Bitcoin, Ripple, Ethereum, or Litecoin, more and more people are asking themselves this question. An item such as cryptocurrency might even prove to be more valuable as time goes by. As a result, policyholders are asking themselves whether this asset as well can be covered as a part of an insurance plan. Cryptocurrency, however, is not the only issue at hand when it comes to property insurance. Institutions such as banks are already using blockchain technology (on which cryptocurrencies are built) to secure their data.
Learn about the future of cryptocurrency in the world of property insurance, as well as how we can use the underlying blockchain technology in the insurance industry in the text below.
The Future of Insuring Cryptocurrency
How can we legally treat cryptocurrency if we want to insure it? Is it even money, or rather a commodity, or property in general? Can you imagine an insurance email marketing notification on your phone, a notification reminding you to renew your cryptocurrency policy? According to the IRS, cryptocurrency is now officially defined as “property.” The general tax principles regarding any other kind of property transaction apply in the case of virtual cryptocurrencies. Will this be in store for cryptocurrencies in insurance as well?
On September 25, 2018, in the case of Kimmelman v. Wayne Insurance Group, the policyholder tried to get reimbursed for around $16,000 in cryptocurrency that was stolen from him, claiming it was “money.” Even though Kimmelman did not get reimbursed for the full sum, and the Ohio trial court did not see it as “money,” there is still hope. According to the abovementioned IRS ruling, the court did agree to interpret cryptocurrency as “property,” and so the policyholder will likely not get out of this empty-handed.
While commercial crime policies are less likely to cover cryptocurrency per se, the policy might apply to what would be a cash value equivalent. In either case, it is advisable for people who want their cryptocurrency insured to talk to their broker about it. Provide some proof of value (and update it if need be).
Using Blockchain Technology in the Insurance Industry
As the underlying technology that cryptocurrencies are built on, blockchain has proved valuable for many other online projects and efforts. Anything from small websites to actual banks is already using blockchain technology, and insurance companies are likely to follow suit. After all, in spite of its immense value for society, insurance companies struggle with a number of issues. The seemingly endless onslaught of daily cyberattacks, human error, fraud, and inefficiency, to name a few.
Blockchain vs. corruption: Insurance agencies have been suffering from a bad reputation, especially since the start of the prolonged COVID-19 crisis. The pandemic-caused damages and losses were specified in varying degrees in various insurance policies. Blockchain could be a way of building up mutual trust between policyholders and insurers. With smart, blockchain-based contracts, any coverage the insurance company does or does not provide is transparently displayed. Additionally, blockchain makes any type of corrupt or criminal behavior virtually impossible. If there is any contractual deviation, such as filing a false or fraudulent claim, the harmed party will receive restitution immediately, no questions asked.
Blockchain vs. cybercrime: Protection against cyberattacks is currently the most enticing functionality of blockchain for companies worldwide. The growing dependency on technology creates bizarre cybercrime scenarios such as a casino security breach via an IoT fish tank in North America. With the current trend of bundling insurance policies in mind, insurers hold a unique intersection of private data – everything from your finances, work-life, health, and personal life. The data stored using blockchain ledgers is fully transparent to authorized persons, without being susceptible to cyberattacks. Every piece of data is timestamped chronologically, and any attempt of manipulation would be impossible without leaving a very transparent trace.
Some insurance companies, such as Wakam, the oldest independent insurance company in France, have already started exploring opportunities in the world of blockchain.
As time drags on, this trend will likely become more and more popular within the industry. Insuring cryptocurrency, as well as using blockchain technology to battle cybercrime and bridge the communication gap between insurers and policyholders, is just around the corner.