Recently, a new cryptocurrency, the Umbrella Coin (symbol: UMC) was launched to address the needs of the insurance industry, including auto insurance. The aims of the Umbrella Coin are to reduce the costs of insurance for ordinary people and to empower consumers with greater choice and service. The Umbrella Coin company believes the application of blockchain technology on a decentralized network can bring about these goals.
Traditionally, insurers take premiums from customers and use these payments to make investments, and then use the interest they earn to pay out claims. The money collected is referred to as the “float.” The Umbrella Coin will similarly take premiums from users using the blockchain platform and denominate them in UMC tokens. Should users never need to file a claim, they will be able to get back what they put into the float at the end of a period. Should users need to file a claim, the community will vote on whether to approve the payout and the amount. Hence, the community is democratic and self-managed, cutting out middlemen who have no interests that align with the community, as is common in the insurance industry today.
The UMC token is ERC20 compatible, meaning it operates on the Ethereum blockchain and can be stored in standard Ethereum wallets. Ethereum is a blockchain protocol that is growing in popularity and use due to its advancements compared to bitcoin and continuous development. Ethereum was developed to allow for the execution of “smart contracts,” which allow users to issue and receive permissioned, self-executing contracts that avoid middlemen. This platform is thus ideal for Umbrella Coin. Additionally, as more companies embrace the Ethereum protocol, those adopting it stand to gain from the growing ecosystem due to compatibility and interoperability from potential partners and customers using the same software. In total, 100,000,000 tokens will be issued, bringing liquidity to the market while preventing the devaluation of the tokens due to a rising supply, as is the case with other cryptocurrencies and tokens that lack a fixed cap.
To protect against the depletion of funds for the cryptocurrency, some measures will be implemented to incentivize the users to keep money in the float. The safeguards are as follows: (1) Early withdrawal fees (up to 40 percent); (2) a cap on individual investment, which prevents the float from depending on any individual investor or user; (3) a starter fee of 20 percent to ensure the project has the needed funds to remain operational; (4) anti-fraud measures, allowing the community to seize funds from a user found to be defrauding; and (5) a minimum policy amount to prevent users from opening multiple accounts and thus gaining voting privileges.
To avoid violating securities regulations, the policy will allow no more than 500 users at any time. Moreover, the Umbrella Coin is not meant for the purpose of making profit or to even replace the insurance industry, according to the company — rather, it is meant to complement the industry by providing users with an alternative with reduced costs. The company also emphasizes that the platform will protect the privacy of users to comply with numerous regulations.
Currently, as of March 2018, the project has been slow to launch. Time will tell if this project succeeds, but regardless of the outcome, the emergence of insurance-related cryptocurrencies is a harbinger for the disruption blockchain technology will bring to the insurance industry.