Bitcoin, a virtual currency developed in 2009, was originally designed as a dark web currency to purchase drugs, or even hit-men; mostly illegal, shady business you wouldn’t want to tie to your credit card. However, in the last five years, Bitcoins have gone mainstream and in April, Insurance Journal, covered a RIMS panel on the implications the fast growing currency is having on the insurance industry.
Currently, there are an estimated eight million people who have opened bitcoin “wallets,” holding roughly $3.5 billion in Bitcoins, with about 82,000 merchants accepting them as valid currency according to Ty Sagalow, CEO and founder of Innovation Insurance Group. Like other currency, Bitcoin fluctuates in value but there is no need for a bank account or credit card. Instead, “users can purchase Bitcoins, store them in a virtual wallet linked to their smart phone, and then scan their account information at participating establishments to pay for merchandise or for other purposes,” reports Insurance Journal.
Robert Parisi, managing director and national Cyber Risk Product Leader at Marsh in New York, believes that on top of its early links to illegal activities, insurers have other doubts about protecting Bitcoin users. One such concern is volatility, understanding how Bitcoin currency fluctuates “is a very complex problem,” for insurers as well as security reports Parisi.
Some insurers, including James Kirtland, vice president of corporate risk management for Voya Financial Inc., say that so far, Bitcoin has been viewed as cybersecurity issue. Although there isnt a product out there for Bitcoin yet, Sagalow drew a distinction between insuring the value of the currency compared to insuring insuring the management of a Bitcoin company. Although the value of the currency cant be insured, the company could be, “like any other D&O [directors and officers] insurance.”
Parisi also noted that there is Bitcoin theft insurance available, although it is quiet expensive. Wrapping up the event, all of the panelists agreed that there is a bright future for Bitcoin market considering “that the vast majority of people in the world do not have bank accounts or credit cards, but many of them do have smart phones,” which means it could become the currency for millions of people.