Moving Insurance

You may think the insurance business is boring, but hey, my dad was an insurance agent, and he sure was never boring (anything, but!)

But he’s been retired for a few years, and the insurance biz is changing.

Example: TechCrunch is reporting on a London-based startup called Zego, a firm that foresaw the need for gig-economy workers to have insurance. 

Though its first products were pay-as-you-go scooter and car insurance for food delivery workers, it has now announced a $42M Series B raise that will help it cater to a variety of “the new mobility services,” including ride-hailing, ridesharing, car rental and scooter sharing.

From a risk management perspective, things get even more interesting, because the company will now offer a range of policies, “from minute-by-minute insurance to annual cover[age], providing more flexibility than traditional insurers, with pricing based on usage data from vehicles.”

Zego’s mission statement in a nutshell can be found in this quote:

Sten Saar, CEO and co-founder of Zego, said: “When we built Zego from scratch three years ago, our mission was to transform the insurance sector by creating products which truly reflected the rapidly changing world of transport… The world is becoming more urbanized and because of this, we are moving from traditional ownership of vehicles to shared ‘usership’. This means that the rigid model of insurance that has existed for hundreds of years is no longer fit for purpose.”

Facebook Introduces Crypto Play

Facebook introduced its new plan around cryptocurrency earlier today, including Libra, a new cryptocurrency, and Calibra, a new Facebook subsidiary that will oversee Libra financial services.

It was a crypto shot hear ‘round the world.

More details from The New York Times:

The effort, announced with 27 partners as diverse as Mastercard and Uber, could face immediate skepticism from people who question the usefulness of cryptocurrencies and others who are wary of the power already accumulated by the social media company.

The cryptocurrency, called Libra, will also have to overcome concern that Facebook does not effectively protect the private information of its users — a fundamental task for a bank or anyone handling financial transactions.

But if the project, which Facebook hopes to begin next year with 100 partners, should come together, it would be the most far-reaching attempt by a mainstream company to jump into the world of cryptocurrencies, which is best known for speculative investments through digital tokens like Bitcoin and outside-the-law e-commerce, like buying drugs online.

If Facebook treats our money the way they’ve treated our personal information, buying drugs online will very well appear a viable option.

All kidding aside, the move is already sending shockwaves through nation states and federal banks around the globe.

According to a report in Bloomberg, French Finance Minister Bruno Le Maire said Libra shouldn’t be seen as a replacement for traditional currencies, that “it is out of the question” that Libra “become a sovereign currency. It can’t and it must not happen.”

A German member of the European Parliament, Markus Ferber, said that “Multinational corporations such as Facebook must not be allowed to operate in a regulatory nirvana when introducing virtual currencies.”

So where should we land on this?  We’ve seen all manner of cryptocurrency plays come and go, Mt. Gox crash and burn, etc.  

I think we should all take a deep breath and remember we’re not talking about some upstart ICO. We’re talking about the world’s biggest social network with the largest number of users introducing a form of digital currency that could upend traditional banking and fiat currency as we know it.

Potentially.

But only if its user base, and the vendors who participate, trust in the new system and, ultimately, in the currency (and, hence, in blockchain).

And trust is not something Facebook has exactly had an overabundance of the past couple of years.

Facebook tries to offer reassurances. Back to the Times: “Your financial data will never be used to target ads on Facebook,” said Kevin Weil, vice president of product for Calibra. 

The currency itself is being built so that any software developer in the world can build a digital wallet or other services on top of it, similar to the way that Bitcoin can be sent between people.

The structure of the new Libra currency is based on the blockchain technology made famous by Bitcoin.

The blockchain concept makes it possible to hold and move digital currencies almost instantly, usually with low transaction fees. Because blockchains are shared databases, they can function without any central operator like the central banks that have historically governed currencies. This structure will allow Libra to be overseen by many companies.

Customers will be able to hold and spend their Libra with businesses that accept the currency, and there will be services that quickly convert Libra into traditional currencies and send the money to traditional bank accounts, according to project documents released on Tuesday.

And the most important graph:

Initially, the Calibra subsidiary will offer little more than a wallet to hold and spend Libra. When Libra is released next year, the plan is to make the wallet available to the billions of people who have accounts with Facebook Messenger and WhatsApp.

If Facebook can create a viable, useful form of currency on platforms with the scale of Messenger and WhatsApp — as Tencent has done with WeChat in China — well, it could literally break the bank.

All of them.