Introducing Crypto Wallet Coverage
February 15, 2022
Today we’re excited to announce the launch of Boost’s latest white-label insurance product: crypto insurance coverage for retail wallet holders. While some commercial insurance has been available to institutions like exchanges, up until now individuals have had virtually no options for protecting their cryptocurrency holdings with insurance. Boost’s new crypto insurance product, developed with our partner Breach Insurance, is the first product that allows individuals to buy protection for crypto wallets held with select custodians. An insurtech specializing in the cryptocurrency space, Breach envisioned this product as a solution to the protection gap that existed for retail investors in cryptocurrency. Bringing new insurance products to market, however, can be a long and arduous road - which is why they came to Boost to navigate the complex process of bringing Crypto Shield to life. This is an area where Boost Insurance really shines: we’ve already done the hard work to assemble the operational, technological, compliance, and capital elements that you need to create a new insurance product, and we package them together into our insurance infrastructure-as-a-service platform, accessible via a simple insurance API integration. For insurtechs like Breach, that means we can help them develop their new products and bring them to market much, much faster than starting from square one. Our insurance and tech experts worked with Breach to create the new crypto insurance product for retail wallet holders, and to make sure it met regulatory and compliance standards in all applicable states. To deliver that product in a seamless experience, Boost and Breach’s platforms connect via API, allowing Boost’s policy administration system to deliver back-end management for the Crypto Shield product. Now that the product is live, Breach’s customers can seamlessly purchase and manage every aspect of their policy and claims process right from Breach’s proprietary platform. All of Boost’s insurance products are backed by A-rated insurance and reinsurance partners, and our crypto product is no exception. Boost and Breach partnered to source and secure reinsurance backing for crypto from Relm Insurance, the world’s leading capacity provider to the crypto sector. Relm has insured companies operating across the cryptocurrency ecosystem, and they were a natural choice to partner with on creating an innovative new crypto wallet insurance product. Learn more about our white-label crypto insurance product, and learn more about Breach’s Crypto Shield offering at breachinsured.com. Boost works with leading insurtechs across a variety of business areas to bring innovative insurance products to market, more quickly and easily than building from scratch. To learn more about how Boost can help you develop your insurance products, talk to our specialists. Continue Reading
What is Crypto Wallet Insurance, and How Does It Work?
January 6, 2023
While cryptocurrency had a rough few months in the second half of 2022, overall adoption of crypto is higher than ever. In 2022, global crypto ownership rates reached an estimated average of 4.2%, with over 320 million crypto users worldwide, and over 15,000 businesses now accept cryptocurrency payments. Global revenue in the cryptocurrencies segment reached $32.52 billion in 2021 and is projected to reach a staggering $74.3 billion by 2027. Cryptocurrency usage is growing faster than ever before, but there’s a giant blind spot in the market: safety. There are billions of dollars in cryptocurrency being held in online custody but less than 1% of those assets are insured. Over the past several years, cryptocurrency has become an increasingly popular target for cybercriminals. Since 2014, a number of crypto institutions have been hit by high-profile hacks. For example, the Ronin Network was recently hacked in 2022 for a shocking $614M, making it the biggest crypto hack of all time. PolyNetwork lost $611M in 2021, KuCoin lost $285M in 2020, Coincheck lost $547M in 2018, and the list goes on and on. When these kinds of hacks happen, hundreds of millions of dollars are lost and the exchanges aren’t always able to fully reimburse individual wallet holders. The Federal Deposit Insurance Corporation (FDIC) protects patrons of traditional banks with fiat money in the event of theft, but no such protection exists for crypto institutions. If digital assets are stolen from a crypto exchange or custodian, whether or not individual wallet holders get their money back is wholly dependent on if the institution is insured and how much insurance they have. Most crypto institutions do have a commercial insurance policy, which provides some protection to crypto wallet holders, but there is no telling when an individual would receive compensation or how much they would get back due to commercial policy limits. In the 2016 Bitfinex hack, customers lost 36% of their holdings – there was only so much that Bitfinex’s insurer would reimburse, and it was less than the total amount stolen. Historically, individuals have had virtually no options for protecting their cryptocurrency holdings with insurance—until now. If you follow cryptocurrency news, you may have seen that Boost released the first crypto insurance available to individual wallet holders in April 2022. This first-of-its-kind, white-label insurance product allows individuals to buy protection for crypto wallets held through select custodians. Boost’s crypto insurance product is currently the only insurance on the market that is available to retail wallet holders. It covers an insured person’s losses if their crypto is stolen through a breach at a qualified custodian: Like all insurance products, crypto wallet insurance doesn’t cover every scenario that could result in a loss. For example, if the wallet holder loses their key and can no longer access their cryptocurrency, that loss would not be covered by their insurance. For the wallet holder, crypto wallet insurance functions very similarly to other types of insurance. The individual crypto holder buys a policy to cover a specific wallet held at a qualified custodian. The amount covered is usually the value of the crypto held in the wallet when the policy is purchased. However, Boost’s crypto insurance product offers the option to extend coverage up to 125% of the insured amount to account for fluctuations in cryptocurrency value. If the custodian is later breached, and the wallet holder’s assets are stolen, the insured individual is protected from loss. Just like with any other insurance, they can file a claim, and receive the compensation they’re entitled to under their policy. Even if the custodian suffers a hack severe enough that it’s forced to give haircuts to its wallet holders, a person with an individual crypto wallet insurance policy could ensure that they, at least, recover the full value of their stolen assets. If your company provides goods or services related to crypto, offering this extra layer of safety to your customers is a great opportunity to increase your revenue, expand your business, and enhance your customer relationships. White-labeled, embedded insurance is a big opportunity for your business to build new streams of recurring revenue. In 2021 alone, the insurance market amassed over $700B in gross written premiums, and that number is only projected to grow. Rather than trying to sell crypto wallet insurance into a new market of customers, you would be selling to the same audience that you’ve already spent time and money acquiring. Insurance is also a very “sticky” product with a high customer retention rate. White-label, embedded crypto insurance allows you to connect with your existing customers on a new level and establish a deeper, ongoing customer relationship with steady monthly premium payments. Offering crypto wallet insurance is a great way to improve customer satisfaction and positive brand association. You can add value by meeting a genuine need and giving your customers peace of mind about the safety of their crypto assets. If your customers are ever in a position where their assets were lost in a hacking event, they can associate their protected assets and reimbursement with your brand. Additionally, tech-savvy crypto holders will appreciate the all-digital process - still a rarity in the insurance industry. Boost’s insurtech platform allows your customers to purchase and manage every aspect of their insurance policy in seconds, right from your website or app. By offering this first-of-its-kind crypto wallet insurance product, you have the chance to differentiate yourself as uniquely secure and customer-focused by providing your customers with valuable protection. Because this is a new product in crypto and in insurance, by getting in on the ground floor, you can gain an edge in both markets. Interested in offering crypto wallet insurance to your customers? A Boost expert can help you get started today. Continue Reading
Crypto Wallet Insurance: Do You Actually Need It?
October 20, 2022
If you follow cryptocurrency news, you may have seen that Boost released the first crypto insurance available to individual wallet holders earlier this year. While institutions like exchanges already had access to commercial insurance, Boost’s crypto wallet insurance is the first opportunity for most individual crypto owners to buy insurance protection for their digital assets. For many crypto holders, however, this raised a new question: since most exchanges do have commercial insurance to protect against theft and other potential losses from cybercrime, what exactly is the role of individual insurance? If your crypto custodian is attacked and your assets are stolen, won’t their insurance policy cover it? The short answer is: it’s complicated. The long answer is that there are three big reasons that individual crypto wallet insurance is a good investment. When you deposit fiat currency into a traditional bank account, you get more than just the bank’s assurance that your money will be safe. Thousands of banks across the US are insured by the government through the Federal Deposit Insurance Corporation (FDIC), which was established in 1933 to stabilize the US financial system after a series of catastrophic bank failures. The FDIC’s role is to make sure that even if a bank completely runs out of money (whether through theft or just mismanagement), the people who hold deposits at that bank don’t lose their savings. If the bank that holds your fiat currency were to fail, the FDIC would provide you with an insurance payment that covered the value of your deposit at the failed bank, up to $250,000. This provides a vital safety net for fiat currency deposits in financial institutions…but there’s no similar protection for cryptocurrency. If your digital assets are stolen from a crypto exchange or custodian, there’s no fallback recovery like the FDIC. Whether or not you get your money back is wholly dependent on the institution’s insurance - or your own. Unfortunately, this kind of loss isn’t an abstract concern, which brings us to the next reason why individual crypto wallet insurance is a smart investment. Over the past several years, cryptocurrency has become an increasingly popular target for cybercriminals. Since 2014, a number of crypto institutions have been hit by high profile hacks: The increasing threat puts crypto exchanges and custodians in a constant arms race against cybercriminals. While reputable exchanges make security their top priority, the past decade of cybercrime has proven that it’s virtually impossible to guarantee that any web-facing system is 100% impenetrable. Adding to the challenge, many significant crypto hacks are believed to be backed by nation-state actors or large organized crime groups. Faced with determined, extremely well-resourced attackers, even the most state-of-the-art cyber security can fail. If your crypto custodian is breached, the contents of your wallet risk being stolen. As we saw with reason #1, if that should happen, there’s no safety net for your assets. The only way to get your money back is through insurance, but relying on your custodian’s policy carries risks of its own. Your custodian likely carries a commercial insurance policy to protect against loss from hacking and theft, which in turn provides some protection to crypto wallet holders (after all, it’s your assets that would be taken in a hack). However, there are two big limits to how much that protection can help: Commercial insurance claims tend to be much more complex than claims for personal policies and take much longer to resolve. Particularly for claims involving crimes like a hack, the insurance company may require an investigation or inspection before proceeding with a settlement. While commercial claims can be resolved quickly, it’s not unusual for the process to take several months between incident and payout - or longer if there’s a dispute over the settlement amount. When your custodian does receive their settlement money, that is only the first step toward you recovering your losses. The custodian will need to decide how to reimburse their cryptocurrency wallet holders, then arrange to disburse the funds. This adds even more time before you see relief in your wallet. If you hold a personal policy insuring your crypto wallet, however, it’s a whole different story. Rather than waiting for your exchange to work through its own process, you would file a claim directly with your insurance company for the value of the assets lost in the hack. With the comparatively straightforward personal line claims process, you would likely get your money back much faster than waiting for funds from your custodian’s policy to trickle down to individual wallet holders. Even the most comprehensive insurance policies have a limit on how much they’ll reimburse their policyholder. This is simply a reality of the business - insurance is all about managing risk, and unlimited payouts are a risk no carrier would be willing to take. Whether it’s $1000 or $1M, all policies have a ceiling for their settlements - and any loss that exceeds that ceiling is the responsibility of the policyholder. For custodians that hold a high volume of cryptocurrency, this means that the total value of their holdings may exceed the limit of their insurance - even if their insurance policy is the best that money can buy. This is a particular risk when the value of crypto is volatile, and might sharply increase from one day to the next. If a custodian is hacked and the losses are more than their commercial policy will cover, it can compromise their ability to reimburse their wallet holders. When that happens, individual crypto wallet holders might end up taking a “haircut” (i.e., permanently losing some of the value of their assets). For example, in 2016, cryptocurrency exchange Bitfinex lost $72 million to hackersand their customers lost over 36% of their assets. They tried to make amends with tokens of credit, but 36% is a significant loss. Similarly, Cryptopia suffered a $16M hack in 2019 and its clients took a 12-15% haircut. This is another advantage of holding your own retail wallet insurance. Even if your custodian suffers a hack severe enough that it’s forced to give haircuts to its crypto wallet holders, you can ensure that you at least recover the full value of your stolen assets. Crypto wallet insurance is one of the best ways individuals can protect their digital assets against the risk of theft. It’s available to buy from specialty insurers, and some exchanges also offer it directly to their customers (with more adding it every day). Interested in offering crypto wallet insurance to your customers? A Boost expert can help you get started today. Continue Reading
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