Stay ahead by staying informed about digital asset insurance
Digital assets have faced increasing doubt and scrutiny recently. Between the FTX collapse and a continued lack of regulation, many insurers are hesitant to explore this space.
But the market for digital assets continues to grow despite setbacks. And as it does, both insurance providers and investors are looking at how they can protect digital assets the same way that they protect physical assets.
If your insurance company wants to stay ahead of trends and better understand this emerging asset class, you need to stay informed. Here are three reasons why your company should be paying attention to digital asset insurance:
1. Investors lack coverage options
Providing coverage for digital assets seems unusual since they exist entirely in a digital space. However, they’re not dissimilar from more traditional types of investments.
Different types of digital assets include everything from art, through options such as non-fungible tokens (NFTs), to currency with cryptocurrencies. And other tokens can even correspond to real-world assets.
They’re also still subject to the same threats of loss, theft, damage, corruption and fraud. In fact, rug-pull scams in cryptocurrency alone have stolen an estimated $2.8 billion from potential investors.
Within that, some companies are already offering insurance for this space. For example, Aegis Trust offers an insurance policy that has $25 million in coverage for NFTs.
And many investors are finding their own ways to protect digital asset holdings. Businesses are using cybersecurity insurance as an option, even if these polices generally don’t speak directly to digital assets.
Of course, there are major differences for digital assets, including the need to address cybersecurity concerns and the general lack of regulation and government oversight. However, as this space continues to develop, so will concerns around the insurance coverage available.
2. The market is here to stay
Digital assets exist in the metaverse — meaning, they operate in an economy much like the one we are familiar with for physical assets, just digitally. And that economy continues to grow.
Currently, the metaverse is facing an economic downturn with the FTX collapse and the arrival of a crypto winter. And the outlook for proper regulations is grim.
But believers in the potential of cryptocurrency are still active. In fact, the market for digital asset investment is expected to quadruple in size within the next two years.
With a market that will continue to play an increasing role in the lives of your customers and prospects, now may be the time to consider how digital asset insurance will become a part of your customer experience or journey.
3. You need to understand digital asset risk
Coverage provided to digital assets needs to be evaluated in terms of your company’s enterprise risk management. As this type of coverage is nascent, understanding the risks will provide a strong path forward when looking at how to offer coverage.
In addition to understanding the full risk spectrum, you will need to consider your company’s people. The right talent is necessary for understanding how to provide options for the digital assets that you want to cover.
Another factor is the rapid pace of change. The news around digital assets fluctuates constantly, even daily. You need to consider whether your company has the talent present to keep up with the demands of monitoring the space.
It’s also helpful to watch organizations that are already doing this work. For example, groups such as the Chamber of Digital Commerce closely monitor regulatory news. They can help you understand changes in regulations and the potential impact on digital assets.
Your clients are another important source of knowledge. Ask them about their digital holdings and how they are navigating this ever-changing asset class.
This information will be key in helping you define the way that your company wants to think about digital assets.
How Wipfli can help
Wipfli insurance consultants are here to help your company stay ahead of the competition. We keep pace with trends and changing regulations to help you understand what to expect from the industry. And we can provide direction and framework for both strategy and enterprise risk management.
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