r/AigangNetwork • u/[deleted] • Jan 12 '18
Aigang (AIX) - Insurance Professional's Analysis of Whitepaper and Potential of Product - xpost to r/cryptocurrency
Aigang (AIX) is a relatively new coin that just hit Kucoin this week. As an insurance professional I enjoyed reading through and analyzing their whitepaper/website and would like to share my thoughts. I’m not an expert by any definition, but I have experience working in numerous roles within the Canadian property & casualty insurance industry. I’ve worked in sales (to public), underwriting, business admin, and business development (marketing to brokers). I thought it may help some of you to understand AIX’ offering better to have someone with insurance experience break down their proposal. It’s not my goal to shill the coin.
Website: https://aigang.network/ (proof of concept is available)
Current Market Cap: $40-60M estimated (based on rumored 11-17M coins in circulation)
Summary of Intent: To quickly summarize the AIX product, we can use their whitepaper title: “Autonomous insurance network – fully automated insurance for IoT devices and a platform for insurance innovation built around data.”
Essentially, AIX seeks to utilize IoT devices that collect data (ie. phones, cameras, drones, smart homes, wearables, etc.) to gather insurance calculations and drive automated insurance products built on smart contracts. This platform would be available for use by insurers and manufacturers. The goal is to build a DAO structure and harness predictive functions. For a more detailed review of this material, please consult the whitepaper.
There is an entire section dedicated to Predictive Markets but I’ll let you DYOR on that topic. What I’d like to address are some of the potential products and solutions mentioned in the whitepaper.
MARKET GAPS
The whitepaper talks about different potential insurance products, like Black Box insurance. The potential for AIX insurance products to fill market gaps can’t be understated. This platform would allow companies to enter space in which they currently can't/don't participate.
Think about flood insurance. It’s available in much of North America but there are some areas where it’s not offered (or offered with low limits and high premium) due to high frequency. AIX would allow customers to add or increase their flood coverage outside of traditional markets. Drone insurance is another example. Canadian insurance companies currently won’t insure drones or their use except for very specific commercial uses.
The whitepaper also mentions insurance solutions for agriculture in developing countries - an insurance market that is either limited or non-existent.
ACTUARIAL BURDEN
Related to the above is the potential for new pricing models. The whitepaper presents an example of insurance for a particular disaster. A probability exercise generates the probability factor and in this example hedging against the disaster would cost 7 units for a payout of 3 units (you only lose your 7 units if the event doesn't occur).
This allows for simplified price models because the probability factor is key. Traditional insurance companies spend vast resources on actuarial work related to pricing models. For homeowners insurance (for example) you have to consider the potential frequency and severity of dozens of perils as well as account for the quality of the house you’re insuring. It’s very complex and actuarial departments are huge. The AIX model above wouldn’t necessarily replace these traditional insurance products, but it could serve as a highly efficient means for companies to offer very specified insurance solutions.
Let’s think about flood insurance again. The provider only has one peril to worry about, so probability analysis is much simpler. Moreover, the contact has a set limit on the payout (which would obviously have a relationship with the probability). A customer would basically be hedging RE: a flood event by offering up X in order to receive Y if the event occurs. Unlike with traditional insurance, the price wouldn’t need to include all the operating costs associated with selling, maintaining, adjusting (claims) the policies because it would all be automated through the blockchain. The end result is a more simplified offering from the provider.
CLAIM AUTOMATION
One potential benefit of utilizing the blockchain is claim automation. Earthquake, flood, drought, etc. information can be automatically pushed to the blockchain which could then pay out on claims instantly based on triggers. An example would be a flood triggering an automatic claim settlement and payout to a customer based on flood data uploaded automatically to the blockchain through IoT devices, satellites, etc. Instead of having to report the claim to your insurance company and then deal with weeks (months) of negotiation and back and forth communication, claims adjusting becomes fully automated and instantaneous.
This is actually quite critical because claims experience is one of the only movers, aside from price, in the property & casualty insurance market (in NA at least). People who are pleased with a recent claim generally renew their policies 75% of the time while those with a bad experience renew less than 10% of the time, regardless of price considerations (http://www.jdpower.com/press-releases/2016-us-auto-claims-satisfaction-study). In Canada most companies have such similar product offerings that claims satisfaction ratings are top priority and companies invest heavily in providing quality claims experiences. If AIX’ platform can provide a more efficient solution then that’s a big win. Plus it would allow companies to expand their offerings without having to expand their operating costs (ie. hiring more adjusters).
POTENTIAL CHALLENGES
Traditional insurance companies are ridiculously slow to embrace innovation. This is actually a benefit for AIX because it gives them a chance to bring their product to the marketplace before its potential customers develop their own solutions. Adopting the AIX platform would be considerably cheaper for existing companies than building their own. However, the challenge will be in the marketing and partnership acquisition. AIX lays out its marketing and partnership plan in the whitepaper if you’d like to review it, but I just wanted to highlight that this will be the biggest key to their success.
An example they give in the whitepaper is smart phone battery insurance that would pay out automatically once your phone detects the battery quality has degraded below a specified threshold. That’s actually a unique and interesting concept that many people may want to purchase, but at the same time it feels very ‘small’ and limited in scope. Almost gimmicky. I’m not saying that that type of product shouldn’t be pursued, but to truly big and successful AIX would need to avoid a public perception of offering ‘gimmicky’ insurance products. They need to offer unique solutions to real problems that impact mainstream customers. (like those I described above).
SUMMARY
I didn’t want to address every aspect of the whitepaper because obviously you all should DYOR. There is plenty there that I didn’t address above, plus proof of concept on the website. I’m also not going to talk about the team or anything else because again my goal isn’t the shill the coin.
Instead I simply wanted to provide a bit of insight into the potential value and market for AIX’ proposed product and platform. In my opinion, there is considerable potential here because of how slow insurance markets are to innovate. AIX has already demonstrated potential market gaps that it can fill in existing insurance spaces, and its automated insurance solution would be a huge benefit to both insurance companies/manufacturers (due to efficiency) and the end customers (fast, easy, transparent). Especially young, tech-friendly generations.
Hope this was useful for anyone considering AIX. Would love to hear opinions from others with insurance backgrounds.
