Etherisc - the Blockchain startup looking to 'change the ecosystem'

After the success of Bitcoin, more and more companies have looked into Blockchain technology as a means of restructuring. So far, not much has happened, some have released products, but are still in the early stages.

But Etherisc, the decentralised platform, says it has been making Blockchain-based insurance work for years.

Since being founded over two years ago, the company has expanded from its original home in Germany to Switzerland, USA and is now in the UK.

And what it is doing, is creating decentralised insurance applications. Rather than having the information stored on one central hub, it is stored on lots of different components which are equally responsible for the running of the system, without the main influencing hub.

It has proved to be successful too, as co-founder Stephan Karpischek (pictured) explained: “Etherisc is currently focusing on establishing real-world use cases for our blockchain-based insurance platform. Recently, two developers in Puerto Rico used our infrastructure and open-source templates to build a tailored blockchain-based insurance policy to help combat catastrophic weather events, particularly hurricanes.

”These types of use cases are very exciting for us as they demonstrate how our platform is already helping people solve real problems and manage risks in their communities.”

Flight Delay

In September 2016, Etherisc introduced, what Karpischek says, is the first working version of an insurance application, called Flight Delay.

In recent months, AXA released a similar product with Fizzy, but Karpischek says Etherisc’s product is the first of its kind.

”We were the first ones to apply this technology to an insurance application, which is running completely on the blockchain.”

If a policyholder’s flight is delayed, Flight Delay will pay out its claim straight away, and if it is on a Blockchain, it is a totally transparent transaction, meaning anyone can see it.

“As soon as your flight is delayed you automatically get a pay-out. So, the idea is to integrate this with airlines, and with online travel agencies, or other websites which sell tickets, which sell airline tickets to passengers. And, with the sale you automatically get an insurance, you pay a small premium.”

Karpischek also stated why he thinks putting an insurance product onto Blockchain is better than the traditional way.

“It provides a very good user experience, so we think that, for customers, this provides a lot of benefits, and it also changes the way that we can look at insurance from a regulatory perspective.”

Fraud

While he feels fraud is never going to be fully ousted, Karpischek also saw benefits to having the product on a Blockchain in relation to fraud. 

“This additional transparency also reduces fraud, in a sense that it’s very easy to detect fraud. I would not say that it really eliminates fraud in total, I don’t think that’s possible with any system where humans are involved, because, in my opinion, fraud is a fundamental part of human nature.

“But, the blockchain is how we can detect fraud, and how regulators can detect fraud, so that’s definitely one way to look at it.”

It is this transparency that Karpischek feels sets Etherisc and Flight Delay apart from the rest of the industry.

“That’s one of the inherent features of blockchain technology. All the transactions that are taking place on a public blockchain and is visible to all the participants. A blockchain is a very bad instrument for doing something criminal because of this transparency. So, we can track any transaction. It’s never deleted.

”For example, with our flight insurance contract, everybody can see that we sold 100 policies over a matter of a few weeks. In our first month, everybody can see that we did 7 payouts and everybody can see why we did those payouts because that flight was delayed by so many minutes.

”So, if you want to, you can get all the information, it’s freely available. That’s not like your usual insurance company where it’s really hard to get some public information on their cost ratios and so on.”

Is it worth it?

With the industry appearing to be surviving fine without Blockchain technology, is there a need for it?

Karpischek thinks there is.

“It is heavily needed because in traditional insurance you have a strong symmetry between the insurance companies and customers. If the insurer gets the money from its customers, every payout reduces the profit of the insurance company.

“The insurance company has a strong commercial interest not to pay out a claim to a customer, and the customer has a strong interest that the insurer pays out.

”The customer is in a much weaker position than a large insurance company. At the moment it’s regulation that’s trying to bring some balance into this.

”On the Blockchain, we can have what we like to call the ’provably fair insurance contract’. This is a piece of software, everybody can read and assess the rules under which it pays out, it cannot be changed without being very public. So, it’s a very transparent system with very clearly defined behaviour, just like any source system it’s very deterministic if you want.”

Do people understand it?

Blockchain technology is known to be very complicated, and that has been one reason why it hasn’t yet been properly implemented in the industry, but Karpischek sees that changing in the near future.

“The way I see this is I think it’s similar to databases. How many customers understand how a database works and functions? How many customers currently use databases through an interface, or an application, or a website?

“Everybody is using thousands of databases every day, and people just don’t know about their functions. And, that’s exactly the way that blockchain will also work, in a few years from now.”

Why hasn’t the technology been implemented sooner?

“It’s very immature, it’s at a very early phase,” Karpischek said. ”A lot of companies are looking at it, and a lot of companies see it as a cost reduction exercise. Many of the blockchain projects we see in traditional insurance companies are now focused on reducing costs, increasing the efficiency of their existing processes.”

But Karpischek doesn’t see it as just a cost-cutting exercise, he sees a much bigger impact on the industry.

We want to change the whole eco-system, change the whole value chain at once, and change how insurers operate.

”We see insurance as a public utility. We developed an insurance process, put it on a public blockchain and now it’s here for everybody free to use, and people can take it, and copy it, and clone it, and adjust it to their needs.”

”Individuals see that there is some change coming, but it’s very hard for them to change the behaviour of a corporation. Corporations are very conservative when it comes to innovation on the business model side.”