BLOCKCHAIN ASSURANCE OFFERING White Paper.pdf · BLOCKCHAIN ASSURANCE OFFERING THE RIGHT COVER AT...
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BLOCKCHAIN ASSURANCE OFFERING THE RIGHT COVER AT THE RIGHT TIME WHITE PAPER SEPTEMBER 2018 https://bao.insure/
Transcript of BLOCKCHAIN ASSURANCE OFFERING White Paper.pdf · BLOCKCHAIN ASSURANCE OFFERING THE RIGHT COVER AT...
BLOCKCHAIN ASSURANCE OFFERING
THE RIGHT COVER AT THE RIGHT TIME
WHITE PAPERSEPTEMBER 2018 https://bao.insure/
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TABLE OF CONTENTS1.Important Information
How BAO Works
The On-Demand Economy
Premium Costs
Future Trends
Digital Trends
Insuretech
Insurance Related ICOs
Current Blockchain-Insurance Attempt
Future Blockchain-Insurance Trends
BAO Screenshots
History
History
Future Trends
The Marriage of Insurance and Blockchain
Current State of Play
Crypto 2017
Current State of Play
The BAO Advantages
2.Executive summary
3.BAO in a Nutshel
4.How Blockchain Can Benefit Life Insurance
5.What the Data Shows
6.Future BAOcoin Value
7.BAOcoin Use
8.Letter from the Founders
11.BAO The Solution 12.BAO Tranches
13.BAOcoin Market Value
14.BAOcoin Distribution
15.BAO Roadmap
16.Insurance
17.Blockchain
18.What the Preceding Data Shows
19.Types of Life Insurance
20.Insurance Terms
21.About this White Paper
22.References
Architecture
Why Blockchain for Life Insurance?
Why Smart, Deep, Big (SDB) Data for Life Insurance?
9.Introduction
10.The ProblemCurrent Standard Insurance Process
Overview 1st Tranche – Oct 2018
Client Applications
Current Levels of Life Insurance
Current Size of Life Insurance
Macroeconomic Trends
Developing World
Risk Reduction Programs
Premium Trends
Digital Offerings
Blockchain in Insurance
Machine Learning
Not just covering, but Preventing risk
Regulatory Environment
Reinsurance
Big Data
China
Asset Allocation
Life Insurance Policies
Application for a Policy Screens
Opt-in Computer Power Screen
Ancient World
Smart Contracts and ICOs
Regulatory
General
BAO
Market
Partitioned, Encrypted, Permanent Records
Streamlined Processes
The Disruption 2nd Tranche – Dec 2018 target
Network Nodes Interface
Up to Date Data
Claims
Buy/Sell/Transfer BAOcoin Screen
The Modern Insurance Company
Privacy
Tailored Policies
The Process 3rd Tranche – Apr 2018 Target
Post Exchange Listing4th and Final Tranche
API Layer
Privacy Concerns
The Platform
BAO Stats Screen
The Opt-in Explained
Make a Claim Screen
The Modern Life Insurance Fund
England Broadens Horizons
America: Insurance for Everyone
America: The 20th Century
The Democratization of Investment
Redundancy
Speed
Cheaper Policies
AI, Smart Data Engine
Community Consensus
Smart Contracts
Cheaper Policies
BAO Blockchain
Smart Contract
Transaction and storage chains
Node virtualisation
Claims
Policy changes and payment confirmation
The Challenges
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Fraud Prevention 18
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IMPORTANT INFORMATIONThis whitepaper outlines the opportunity to purchase tokens, and the intentions of the project team to create a new method for offering insurance contracts in global markets. The items for sale are created from the registration of a decentralised cryptographic token often referred to as a “cryptocurrency”. This token will be able to be traded or exchanged at a point in the future on secondary markets for a market-based price.
BAO provides no warranties and purchase of BAOcoins provides no guarantees except ownership of the associated BAOcoins. Purchasers of BAOcoins accept that there are risks relating to the delivery of commercial contracts and the development of new technology. Buying a token is not a share in a company and it is not a loan to a company. Buyers risk the total loss of their funds without right of appeal or the ability to receive a refund.
The BAO team commit to making every effort to use the funds from the sale of BAOcoins for the express purpose of fulfilling the project objectives. This purpose includes purchasing access to data channels and ensuring the company is appropriately licensed in any jurisdiction it operates in as well as creating the core technology.
The BAO team cannot confirm compliance with any regulatory body or prudential regulator. Before purchasing any tokens consumers should consider consulting with the consumer protection agency or financial regulatory body within their own jurisdiction before proceeding.
Service provision, such as discounts on premiums, may not be available in all jurisdictions in the future. For any given jurisdiction, what services can be provided in that jurisdiction and the manner in which those services can be provided is dependent on that jurisdiction’s regulatory environment.
In some circumstances you may be required to provide further information prior to us accepting you as a purchaser.
Statements within this document and associated BAO materials are indicative only and are subject to change without notice in response to business and market dynamics.
The products as described in this document are subject to change in any and all aspects in order to satisfy business and technical requirements.
Global Anti-Money Laundering (AML) and Counter Terrorism Financing (CTF) legislation: BAOcoin represents an opportunity to purchase a token and trade it on a secondary market. This mechanism may come under various jurisdiction’s laws in relation to AML and CTF. For this reason, all token purchasers must submit their personal details to us when purchasing BAOcoins.
Please see the “About this Whitepaper” section at the end of this document for further important information.
The purchase of a token is provided as is. While best endeavours will be made to deliver a fully functional, revenue generating platform and offer insurance contracts to market there is no guarantee, whether implied or presented, that this will occur.
Tokens sold are not shares and do not represent ownership in any company or asset linked to the delivery of the company’s objectives. A token is a distinct asset that may provide rights in the future, as outlined in this paper, including the right to enter into a contract to supply computing power to the insurance network. The token is intended to be a stake of claim which entitles the holder, among other things, to receive payment in exchange for supply of services.
BAOcoin is not a financial product. BAOcoin does not claim to pool capital to achieve a return or dividend. BAOcoin does not entitle an owner to receive income or other financial benefits without providing services back to the issuing company and it does not manage financial risk or allow the purchaser to redeem it for another service (eg a non-cash payment) however it may do so in the future once registered and licensed as required.
BAOcoin is a tradable commercial smart contract which may include, but is not limited to, the following in the future:
1. An offer to purchase computing power from the token holder, the terms of which can be changed to suit the network operation as required;
2. Integration into platforms to confirm acceptance of insurance contracts and to ensure the mutuality of obligation;
3. Integration into methods to track and confirm the payment of considerations.
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• BAO aims to provide life insurance policies globally via dedicated on-line platforms.• BAO aims to raise the substantial funds needed for this enterprise through the BAO Token Launch and the sale of
BAOcoins.• BAO aims to make the BAOcoin integral and essential to the operation of the BAO insurance network.• The BAO Token Launch has four tranches with larger discounts for the earlier tranches.• The first tranche is at a 60% discount to the second tranche and is scheduled to commence in October 2018.• BAO aims to make BAOcoin one of the leading cryptocurrencies both in the market cap of BAOcoin and in the
success of the associated BAO Insurance business.
• Life insurance policies are contracts that can be mirrored by Smart Contracts. o Once on the blockchain they then become trust-less and immutable. - Reduced fraud means reduced premiums across the board. - Secure policy data means reduced IT infrastructure costs. o The Smart Contract can be constructed to automatically meet claims when the given criteria are met. - This will reduce one of the most significant costs for insurers.• Policy transactions recorded on the blockchain will be trust-less and immutable o roviding peace of mind to customers that their cover is current.• Access to the blockchain by regulators will make compliance more efficient, further reducing costs.• Claims adjudication can be improved through robust validation engines that rely on the blockchain and smart contracts.• Policy cross checking can be automated and the blockchain as a single point of reference can assist with further validations by administrative staff.
BAO aims to revolutionise life insurance by combining the advantages of smart contracts and blockchain ledgers with the power of smart, deep and big (SDB) data to improve the access and affordability of policies.
BAO is a stand-alone platform. Stand-alone platforms are typically preferred for cryptocurrency purchases, as their success is not dependent on other products or services.
The BAO team has the skills and experience to implement this ambitious goal.
Insurance and blockchain-smart contracts are a natural marriage. Add in SDB data analysis and the offering of insurance can be largely automated, and possibly with time, fully automated (the DAO).
The benefits that BAO aims to provide to consumers are:
• Insurance cover where none currently exists;• More accurate risk profiling for cover and as a result, better pricing;• Faster turnarounds, so that buying insurance is hassle-free;• Automatic offering where possible and appropriate;• The ability for the community to opt-in to contribute computing power and receive payment;• The ability for other insurers to use our platform;• Automatic claims processing where possible and appropriate.
EXECUTIVE SUMMARY
HOW BLOCKCHAIN CAN BENEFIT LIFE INSURANCE
BAO IN A NUTSHELL
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THE ADVANCED WORLD IS MIS-INSURED WITH POLICY OWNERS RARELY HAVING THE RIGHT AMOUNT OF COVER
THE OPPORTUNITIES IN DEVELOPING MARKETS ARE ENORMOUS1
THE DIGITAL GENERATION (45 YO AND BELOW) ARE DEMANDING SMARTER PRODUCTS
PURCHASING LIFE INSURANCE IS PRICE AND SITUATION DEPENDANT – SMART AND LOW COST OFFERS WIN
INCUMBENT PROVIDERS HAVE FAILED TO INNOVATE
BAO AIMS TO SUPPORT NEW MARKETS IN DEVELOPING ECONOMIES
GLOBALLY, PEOPLE ARE UNDER-LIFE INSURED
WHAT THE DATA SHOWS5.
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FUTURE BAOCOIN VALUEWe provide the following as speculative commentary and note that the only price BAOcoin can control is the price we sell the tokens for.
The aim of BAO is to position BAOcoin within the top 10 cryptocurrencies.
We believe this may occur through upward price pressure from the following areas:
1. BAOcoin may be seen as a store of wealth in a similar way to other cryptocurrencies;2. Earnings by BAOcoin holders for opting-in to supply computing power;3. We aim to launch a product to market quickly through existing providers and reward
token holders who participate in alpha and beta testing. 4. The long-term trend in increased computing power and lower energy generation costs
which increases the effective income for those opting in to supply computing power.
BAOCOIN USEHow a coin is used ties in with the market value of the coin. The more utility the coin has, the more potential value it has on the secondary markets.
Currently identified uses for BAOcoin include:
• The opt-in to provide computing power in return for payment in either fiat or BAOcoin.• As part of the policy identification process.• As part of the policy transaction verification process (as distinct from the BAOcoin transaction verification
which will initially be handled by the ETH network).• To provide a discount when buying policies (may require regulatory approval in some jurisdictions).• To earn additional BAOcoins during testing phases.• To trade on the exchanges.• As a method to buy a policy and be paid a benefit – for example, individuals in nations with a volatile currency
may prefer to paid a claim in BAOcoin which may store value more effectively than their fiat currency.
Token owners will hold their BAOcoins on their ETH wallets in the same way as other ERC20 coins.
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LETTER FROM THE FOUNDERSThank you for your interest in purchasing BAOcoin. Our team are dedicated technologists and financial services professionals with an ambitious goal: to bring insurance into the modern age.
Life insurance exists to prevent the financial misery caused by an untimely death. We propose to completely change the way the world buys and owns life insurance. We aim to start with the easily defined and data rich first world markets and afterwards move to protect the lives of families in developing economies.
Why tackle insurance? Because buying insurance and making sure you have the right amount is currently painful and the industry is struggling to retain the trust of regular people.
If you can’t trust a corporation or a regulated institution who can you trust? Perhaps the immutable consensus of proof of work, cryptographic algorithms!
The guarantee an insurance company makes underpins economic growth by transferring risk, which allows family units to put more of their income to use in the economy without compromising the futures for children and other dependents. The BAO platform aims to allow a household, a community and an economy to shift the risk of specific events like an untimely death easily, instantly and accurately.
The insurance market is due for a major disruption and BAOcoin proposes to change the way we buy and own life insurance. Using intelligent data analysis and trusted data sources BAOcoin aims to move away from a buy-hold-cancel product cycle to a dynamically adjusting protection solution that delivers the right amount of cover at the right time. BAOcoin is the vehicle by which you can contribute to this momentous task, earn income by assisting the network with your computing power, and we hope, see your BAOcoins grow in value as BAO grows.
The BAO platform aims to allow for the monetisation of computing power by providing token holders with the right to supply computing power for payment and trade this entitlement with other parties on the secondary markets via BAOcoins. The more coins you have, the more you will be able to participate.
Distributed computing power represents a better way to measure and distribute the computing and data storage requirements of a global insurance company. Our platform aims to decentralise processing and reward work and can operate as a mechanism for other processing areas requiring complex assessments of dynamic data sets.
This whitepaper outlines our strategic plan to deliver the following short term:
The team is very excited about the future. Our product will aim to help families in their time of need while providing a commercial platform for people to sell their computing power to assist us, which is a departure from many node dependent systems where true value creation is concentrated among the few.
We aim to start in developed nations with a price point for insurance which will disrupt a multi-trillion-dollar market and then invest into the less developed areas where others fear to tread.
BAO Insurance aims to bring safety to families and pay token holders for playing their part in this great journey.
1. A life insurance contract offered, amended and paid autonomously with minimal human intervention.2. A system allowing the average user to monetise their spare computing power.
Longer term, BAOcoin aims to contribute to a brighter and more equitable economic future through:
1. An algorithmic wealth protection system that collects and disseminates capital based on data points (death, sickness, injury) to automatically protect individuals as and when required.
2. The acceleration of institutional infrastructure to developing nations (e.g. electronic record keeping) designed to increase financial inclusion and bypass corruption.
Yours sincerely,
Michael BaragwanathCEO and Founder
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Life insurance is a multi-trillion-dollar market. The Australian Market alone (a relatively small but modern market) represents more than $33 billion in revenue per annum. The USA market is estimated to be over $597 billion per annum. Insurance premiums in first world economies are approximately 2.7% of GDP2.
Life insurance is a very old industry with the Babylonians recording its operation in the Code of Hammurabi3, however the first life insurance contracts appeared in the 18th century when statistics and data allowed companies to price the chance of death.
Many insurers today still use basic life tables, statistics and medical statistics to price life insurance policies. They also incur significant administration costs and have outdated systems that make it difficult to buy, own or trade life insurance contracts.
Life Insurance Market Size
Premiums (% of GDP)
$2.5+Trillion 2.7
INTRODUCTION9.
THE PROBLEMCURRENT STANDARD INSURANCE PROCESSThe standard insurance process involves the person (life insured or applicant) choosing to buy cover. This requires a conscious choice on the part of the applicant or direction from another party to pay money to protect against a future risk. Humans are typically optimistic and therefore the chance a person will think about protecting their family is sub-optimal. This creates a term called “underinsurance” where the family does not have sufficient life cover to protect against death.
The applicant is then assessed by the insurance company. The company weighs up age, lifestyle factors and health in-formation and compares it against a pool of statistics called survival rates (the likelihood of a person surviving a condi-tion or set of factors over a set time-period).
The insurer accepts the offer by the applicant and then issues the policy, taking on the risk in exchange for a premium (cost of the policy). In the event of a claimable event the insurer asks the family to substantiate the claim, assesses the claim and where re-quired investigates to see if the applicant attempted to deceive the insurer.
Should the applicant need to amend their policy they will need to contact the insurer in writing to request the amend-ment. In the absence of any request the insurer will typically increase the amount of cover in line with inflation or anoth-er growth factor.
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THE CHALLENGES• Insurance is difficult to marketThe insurer needs to market both their services and the need for their product to a naturally resistant market due to its inherit optimism bias.
• Anti-Selection RiskBy relying on applications, the insurer takes on an “anti-selection risk” where a person knowing they have a health issue seeks to buy cover and then needs to potentially decline claims in the future which is a PR disaster as insurers need to be trusted to deliver.
• High CostThe process of application and acceptance is very expensive with up to 45% of premiums collected paid out to secure and administer a client policy.
• Inefficient DataThe data sources for claims risk are pooled and while assessment may or may not be personalized the insurer relies on the answers provided by the applicant and then in the interests of expediency often only checks this at claim. This leaves the insurer exposed to higher risk and disastrous PR outcomes when claims are disputed due to non-disclosure.
• Performance PressureSales and administration teams have a conflict of interest in making offers to sub-optimal clients to achieve volume targets and return on market and administration expenses.
• Difficulty in Policy ManagementAmendments to policies are static - i.e. they require client-side optimization and in the absence of this the insurer increases the benefit in line with a growth factor. However, typically a person’s insurance needs DECREASE as their net wealth increases over time and because of the manual process many clients neglect to retain the appropriate amount of cover. In most circumstances persons aged 30-45 are under-insured with those aged 55+ over-insured causing them to cancel the contract rather than amend it.
Life insurance in modern markets is cumbersome, inefficient, fighting against human nature and constantly walks a tightrope between PR disasters and earning a commercial return.
Clients find the process lengthy, intimidating, difficult to change and unnerving to deal with in the event of a claim.
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BAO THE SOLUTIONOVERVIEWThe technical overviews are high level and will be superseded by the BAO Technical White Paper.
The next evolution of insurance is automated pricing and dynamically managed cover by leveraging the latent power of personal data being created every day by our online activities. The insurance contract will eventually monitor a client’s financial situation and ensure that the benefit at claim matches the needs of the insured.
Such a product will be designed to operate on a premium basis where a dollar amount is collected and used to fund the cost of insurance. The premium cost will change dynamically based on linked data sources with the surplus held to provide for future claims.
With BAO both the premium and the claim benefit may be able to be held in BAOcoin where the token is either registered as a “non-cash payment” with a regulator in that market or where the market has no infrastructure to monitor financial services companies. This may assist residents with highly volatile fiat currencies – they would be able to make a lump sum prepayment of premium and hold cover until the lump sum has been fully utilized.
The blockchain and self-executing smart contracts present a technology that can disrupt the entire insurance industry. A decentralised autonomous policy issuance and claim service utilising reliable data sources can significantly reduce the cost to acquire and hold a policy.
Make Offer
Adjust Cover
Pay Claim
Data driven underwriting
Data driven policy ammendment
Automated claims
BAO Insurance aims to make timed offers based on data points of need rather than relying solely on general branding exercises. Such offers may dramatically reduce marketing and acquisition costs.
Where such offers have been made the anti-selection risk is reduced. By assessing clients automatically, the insurer also avoids the risk of declining claims due to non-disclosure as the client is not asked for their opinion on their circumstances.
The aim is to have the process of policy issue and administration as fully automated as possible over time, dramatically reducing the cost to issue and maintain contracts.
In addition to survival risks BAO aims to leverage predictive personal data sets to determine a life insurance risk profile and need for cover. This simplifies both the claims process and the policy amendment process.
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An offer algorithm will be tasked in determining and offering cover. The algorithm is designed to count down to zero.
This means that it is the long-term intention of BAO to be able offer a dynamic life benefit to 100% of the global population. To achieve this goal the software engine will need to accept risks in order of least to most risky over time.
Because policy amendment will be dynamic based on data for each individual, there will be no need to request a policy amendment and typical policy requirements may reduce over time. By collecting both premium and a small cash buffer the insurer can offer either static, climbing or declining contributions from the client while providing a level of cover matched to their current and future needs.
BAO aims to transform the way we think about early mortality by developing a streamlined, dynamic and effective contract at a rate well below the incumbent providers. BAO works with human nature and avoids challenges with claims management and the eroding of trust that come with the potential for claim denials.
BAO will have significant data storage and processing requirements and the management team have decided the best way to build this platform is to leverage the latent and growing computing power in the hands of the very consumers BAO aims to protect.
THE DISRUPTION
Figure 1 - BAO Disolution
Rights to provideledger services
Managers policy ledgerand verifies transactions
Provides lifeInsurance contracts
BAO proposes to dramatically disrupt the life insurance industry by automating the underwriting, offer, collection and claims processes of the insurer and to leverage latent device and desktop, smart device and embedded computing power to determine life risk factors.
The algorithm starts at count 100 and cycles down to 0. One hundred being a perfectly healthy, young and safe person. Zero being an otherwise uninsurable person.
The offer completely changes the insurance buying process. Offers will be made to persons as well as being able to apply for cover. The insurer may waive its rights to underwrite the policy beyond data analysis and the contract can be guaranteed renewable (also called non-cancellable) meaning the insurer cannot alter the terms or cancel the policy. The insurer can dynamically lift or reduce rates based on the risk presented by the life insured within industry standard
This is expected to reduce the price of holding insurance by up to 65%.
NODE
BAO DL
BAO LIVE
Token allows holder to opt in to provide computing power to supply and maintain
the ledger and to verify transactions
Manages all IT and distributed ledger services
LIFE INSURANCE CUSTOMER
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The automation of contract offers utilises independent nodes each with a set of algorithms designed to assess and confirm a decision in the work flow.
A new client data set will present the node with the information required to deliver an outcome. This decision is then verified by a separate node using a different method and then verified again with a final method. Each method also verifies the validity of the previous method with a checksum. This system ensures compliance with the process procedure in a trust-less system and allows the data to follow any of the prescribed packet paths.
In the case of insurance, a new policy holder will need to be assessed for acceptance and this could be determined by one of 4 data channels: 1. Government – medical and personal information.2. Bank data- personal information and purchase data heuristics.3. Social media – personal information and heuristic analysis.4. Personal disclosure by the applicant.
The data packet is then processed by set algorithms and then signed by the node key before being verified by a secondary node.
The same process is completed when new data is available for policy modification, claim verification or payment confirmation.
pricing (e.g. up to a maximum of 600% of standard rate). Offers are made based on data analysis of the client’s smart, deep data in relation to big data and matching this with appropriate levels of cover.
Claims where possible are paid through data matching with government services and in such settings may avoid the need for a family’s involvement in the claims process.
The insurance policy database and computing power used to determine policy risk will be operated by a distributed computing network. Token holders will have the right but not the obligation to provide computing power to the network and will receive payment for this service.
Figure 2 -
BUYER SELLER BAO LIVE
BAO Transaction Proceess
THE PROCESS
Token allows holder to opt in to provide computing powe to supply and maintain
the ledger and to verify transactions
Contract to build platformsto provide policies
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Node 1 Node 2 Node 3
Transaction Chain
Transaction Chain
Transaction Chain
Storage Chain Storage Chain Storage Chain
Verify
Replicate Replicate
Stripe Stripe
Verify
Valid Policy #010
Original data packet
Decision signedby a private key
Decision signedby a private key
Decision signedby a private key
Public Key Address Public Key Address Public Key Address
Hash and data packet Hash and data packet Hash and data packet
Valid policy #010 Valid policy #010 Valid policy #010
Algorithm sets
Set 1 - Offer/decline(method 1)
Set 2 - Amount of cover(method 1)
Set 3 - Claim determination(method 1)
Set 4 - Payments status(method 1)
Algorithm sets
Set 1 - Offer/decline(method 2)
Set 2 - Amount of cover(method 2)
Set 3 - Claim determination(method 2)
Set 4 - Payments status(method 2)
Algorithm sets
Set 1 - Offer/decline(method 3)
Set 2 - Amount of cover(method 3)
Set 3 - Claim determination(method 3)
Set 4 - Payments status(method 3)
Original data packet(encrypted and stripped across notes - raid 5 stripped parity)
Original data packet(encrypted and stripped across notes - raid 5 stripped parity)
Original data packet(encrypted and stripped across notes - raid 5 stripped parity)
Figure 3 - BAO Transaction Chain
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TRANSACTION AND STORAGE CHAINS
NODE VIRTUALISATION
POLICY CHANGES AND PAYMENT CONFIRMATION
CLAIMS
Each node in the network will carry the responsibility of verifying transactions as well as participating in the processing of transactions and storage of data.
Token holders will be able to (based on the number of tokens they hold) supply their computing power to provide part or all of this process for a node.
To ensure appropriate scaling and prevent bottle necks the platform may switch to a node virtualisation model if no one token holder or computer offers sufficient computational power to participate within a given zone measured by latency. In this scenario the server platform will assign “hypervisor” status to devices with a known-up time exceeding a viable threshold and assign individual client data packets to nodes in the array for processing. Storage may convert to a triple parity raid method to ensure consistent access and data security. Node virtualisation will be designed to operate in mobile only zones such as Africa.
External data feeds or direct client requests will drive amendments to the policy and payment confirmation. Actual policy payments will be collected and managed by centralised, insurer owned systems, however the node’s may be involved in transaction verification and resulting policy updates.
Policy amendments can be dynamic – e.g. a client registers a new mortgage with their bank which trips a flag for processing by the node array. The algorithm then determines a new optimum amount of cover and solves the equation to either increase cover within the allowable range or approach the policy holder for an additional contribution.
Smart contracts will enable the automatic processing of claims to beneficiaries based on data received from death registers. Since, in the advanced economies, this data is accurate with little to no margin of error the risk of fraud and erroneous payouts is minimal. Irrespective of near certainty from government registers each node and method will note changes in behaviour across other platforms which will provide a consensus for claim payment.
In the case of developing markets where government sources may not be accurate or available the team will be tasked with identifying new data sources and records that can corroborate a claim event and authorise payment.
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CLIENT APPLICATIONS
NETWORK NODES INTERFACE
The BAO Insurance platform will be a highly sophisticated network of integrated solutions that connects BAO with the potential consumers, policy holders, opt-in nodes and 3rd party data sources.
User interfaces will be accessible from a variety of devices to interact with the system, and will allow the receiving of policy offers, claims processing, policy amendments, opt-in to supply computing power, and the buying and selling of BAOcoins.
This module is primarily for users who opt-in to provide computing and processing of policy transactions, data analysis service and accepting payments for the services rendered. This interface will allow a token holder to assign their token value to an operating hardware site or submit their own hardware to the pool.
CLIENT APPLICATIONS
API LAYER
STORAGE
DATABASES
AI, SMART DATA ENGINE
BAO BLOCKCHAIN
DATA SOURCES SMART CONTRACTS
OPT-IN NODE Interface
API LAYERThe interface for all 3rd party plug-ins and integrations including access to data sources and external ledgers.
Figure 4 - BAO Network Nodes
ARCHITECTURE
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AI, SDB DATA ENGINE
SMART CONTRACTS
BAO BLOCKCHAIN
The proprietary AI engine that will analyse and process SDB (smart, deep, big) data for policy offers and claims processing.
Self-executing contracts that process claims for automatic payouts. Smart contracts also track the opt-in nodes and control the amount of fees payable for providing data processing, storage and verification services.
BAO’s blockchain and protocols will maintain the insurance policies, and will give access to trusted nodes and network partners to verify and record transactions and process policies. Large data sets will be partitioned across the network for storage.
PARTITIONED, ENCRYPTED, PERMANENT RECORDSBlockchain is currently the pre-eminent solution to deploy a trust-less, automated contract system that is near impervious to data corruption. Life insurance contracts require the pinnacle of data security and longevity as well as sufficient capital to reserve for payments.
The distributed server network will provide the system to record token holders and their status as either participants in the distributed computer network or not. The number of tokens they hold multiplied by the weighted DCP (distributed computing power) they provide to the network will determine the fee for service they receive.
Blockchain will sit alongside database distribution (partitioned) and distributed computing power to provide the perfect secure system to record participants and their rights to income in exchange for providing services.
BAO aims to ultimately create its own proprietary distributed database and analysis system that will share both datasets and analysis of those datasets across a mesh of users with valid tokens.
The blockchain ledger for token holders and active rights users will leverage traditional blockchain however the company proposes that its proprietary technology will distribute encrypted client datasets without identifiable information to nodes with sufficient computing power to determine the eligibility of an offer of insurance. This analysis will then be compared against other nodes and accepted based on congruence across a threshold of nodes.
The database platform will be purpose built for end to end encryption of data and seamless analysis of that same dataset. Computing power will be used to continually analyse a policy holder’s position, need for cover and risk profile while simultaneously retaining a database of lives insured.
PRIVACYDCP is also ideal for storing sensitive private data, like life insurance data.
BAO aims for the highest level of privacy possible, with methods including but not limited to the partitioning and encryption of data across multiple nodes.
WHY BLOCKCHAIN AND DCP FOR LIFE INSURANCE?4
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The distributed nature of the networks protects against the loss of data and the threat of hacking.
REDUNDANCY
COMMUNITY CONSENSUS
CHEAPER POLICIES
SMART CONTRACTS
Where possible, BAO aims to automate the claims and applications processes.
However, in certain settings such as third world markets with poor data handling this may not be possible. It may be possible to use the community consensus inherent in blockchain to assist in areas requiring investigation.
The use of the blockchain structure for record keeping and event verification combined with distributed computing may reduce overheads and therefore the cost of premiums. More than 40% of total premium cost is spent in sales costs, underwriting assessment and administration of existing policies. Automation of these functions as well as the use of SDB data analysis may allow BAO to dramatically reduce the cost of cover. We expect a base premium reduction of more than 40% below the average “automatic acceptance/pre-existing condition” contract based on the following:
1.Savings from reduced administration and customer acquisition costs (20%) 2.Savings from data and analytic underwriting and the reduction of anti-selection risk (10%)3.Savings from dynamic benefit calculation (typically reducing as wealth and age increase) (5%)4.Savings from policy holder specific health and safety marketing to reduce morbidity (5%)
Intelligent use of SDB data analysis has the ability to increase these savings to 65% through more accurate individual pricing.
Establishing a distributed data-handling and storage system is much more capital intensive than relying on 3rd party storage providers, but may well result in further operational savings.
Payments to token holders for their provision of computing power will aim to provide a commercial rate that incentivises people paying retail rates for electricity.
Life insurance policies are contracts with well-defined terms. They are ideal for application within a Smart Contract system, which will also provide increased reliability and speed for the transactions surrounding policies.
17
TAILORED POLICIES
STREAMLINED PROCESSES
The more data an individual can provide, the more accurately the risk assessment process and the greater the ability to provide tailored individual solutions.
Big Data allows organisations to draw conclusions from large data sets, often with broad, population based predictive results.
Smart Data is the unique digital footprint of an individual and delivers personalised, predictive offers and can also be used to predict life events.
Deep Data is the broadening and detailing of Smart Data to the point that internal Smart Data correlations and conclusions can be drawn.
The combination and correlation of Smart, Deep Data with Big Data will allow accurate, tailored policies and will allow the insurer to hold appropriate reserves for claims and to actively monitor the risk of insured lives.
Studies have shown that relevant data can replace medical examinations such as blood tests4.Life insurance has multi-decades of data allowing for risk assessment.
Simply the application of the analysis of SDB data in relation to individual coverage will allow the streamlining of the life insurance application process.
Through the application of machine learning and outcome analysis, BAO aims to develop deep proprietary IP in relation to the life insurance policy assessment process.
Insurance offers can then become personalised and proactive based on consumer life events rather than reactive and selective.
WHY SMART, DEEP, BIG (SDB) DATA FOR LIFE INSURANCE?
SPEEDIn a recent LIMRA report, many life insurance applicants described the process as intimidating5 due to the lengthy forms, slow turnarounds and medical tests.
This has resulted in low historical levels of insurance in the Advanced World with many believing they are underinsured.
Through the use of SDB (smart, deep, big) data, the BAO application process will be fast and painless and BAO aims to actively target the underinsured sector.
CHEAPER POLICIESThe use of big data will allow BAO to further automate the application assessment process, thereby reducing overheads and the cost of premiums.
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BAO is a blockchain network built on the Ethereum network.
Token owners will eventually be able to use their tokens to:
1.Opt-in to provide computing power to the network in return for fee for service payments;2.Use their tokens to receive a discount on a BAO life insurance policy;3.Participate in the Beta test to earn further BAOcoins;
Participants in the BAO Token Launch will eventually be able to receive these further benefits:
1.Ability to participate in the Alpha test and earn further BAOcoins;2.Increased earnings in the Beta test;3.Increased earnings via the Opt-in.
The BAOcoin does not represent equity in any related company and the BAOcoin does not entitle the owner to any dividend, revenue share, profit share, or similar share in the revenue or otherwise of any related company.
HOW BAO WORKS
FRAUD PREVENTION
PRIVACY CONCERNS
UP TO DATE DATA
Fraud is estimated to cost the insurance industry more than $80 billion annually7.
SDB data and the cross referencing to increasingly transparent and connected government databases will allow BAO to reduce instances of fraud and thereby also the cost of premiums.
In a 2015 study8 it was found that consumers were motivated to disclose private data by both financial reward and convenience and that concern for privacy was generally low provided that expected rewards were received and that there were controls in place for the data.
The protection of personal data will be of the utmost priority to BAO and data will be stored and used in line with best practice and regulatory requirements.
Personal data will be protected through encryption, sharing and security layers and will only be used outside the network with the owner’s consent.
SDB data will allow BAO to maintain up to date data on policy holders, which will allow:
• Review of individual cover and the potential for savings;• Less arbitrary, more up to date risk pooling;• Enable services aimed at improving lifestyles, longevity and the lowering of risk;• Promoting superior engagement with policy holders and lower lapse rates.
LIFE INSURANCE POLICIESEach life insurance policy issued by BAO will be a smart contract, the terms of which will be recorded in the blockchain in a secure and encrypted format.
Customers can apply for a premium quote and receive discounts for giving BAO access to additional data. Applicant’s private data will be held securely and will not be given to third parties without the applicant’s permission.
Where possible, automated offerings will be made available to customers of BAO partners, but only where privacy and security laws are followed.
SDB data, through proprietary methods and algorithms, will enable the BAO platform to accurately price insurance policies for customers, and to accurately review policies over time and provide recommendations to customers.
Big data will allow BAO to vary these algorithms to account for regional and demographic differences.
19
CLAIMS
THE PLATFORM
SERVER
CLIENT
Where possible, and where data permits, BAO aims to automate claims processing.
Where this is not possible the team will retain qualified professionals to assess claims and adjudicate any disputes arising from the automated system.
The BAO servers including the distributed network will be there to carry the heavy loads, including:
• SDB data filtering, processing, verification and statistical correlation;• Individual policy term calculations;• Manage the opt-in process;• Analytics on network performance;• Claims processing.
Token holders will eventually be able to install and run the server environment to contribute to the distributed computing platform based on their token holding and infrastructure demand.
The Server platform has been scoped to use a modular code base where the distributed network, load balancing and data packet processing and consensus check will be one aspect while the core algorithm to process and protect unique client life data will be another. The server platform may initially be made available on Linux, Windows, MacOS, iOS and Android. The development team will assess setting up server versions for expired android and IOS platforms to allow older devices to contribute to the pool.
The client will eventually be available in iOS, Android, native OS and Web versions and aims to allow anyone, anywhere in the world to connect data sources and become eligible for a life insurance policy.
Over time this will expand to other forms of insurance cover.
Other features of the client will be:
• The ability to opt-in to provide computing power and to manage your opt-in;• The ability to buy/sell/transfer BAOcoins;• The ability to monitor the performance of the BAO network and BAO insurance business;• The ability to make a BAO policy claim.
BAO may expand to provide white label offerings to other insurers.
THE OPT-IN EXPLAINEDBAOcoin holders will have the right to opt-in to provide computing power and storage to the network in return for service fees.
Potential services include:
• The verification of policy transactions;• The storage of policies;• The processing of data;• The storage of data.
This will vastly increase the scale that BAO can grow without costly infrastructure expenses.
The fees earned by token holders through the opt-in will be a function of BAOcoins held and computing resources contributed.
BAO is aiming to provide an average 10% return per annum for token holders that choose to opt-in, following listing on the exchanges and the company commencing the collection of premiums. The level of returns may be significantly higher for those who purchase coins in the earlier tranches. This target of 10% returns for opt-in participants is an indicative aim only and results will vary from year to year dependent on business performance and market conditions.
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THE OPT-IN PROCESSA BAOcoin holder must use the client to opt-in all or some of their tokens using the BAO client.
Once opted-in they may then associate devices with their BAOcoins.
They may then decide which device components they make available – processing, data storage – and will be able to fully manage when the components are used and to what degree (so as not to impact their use of the device), or whether to allow the opt-in manager to dynamically adjust usage based on how the device is being used at any time, or in relation to network needs.
The BAO client/server will then need to be installed on the device. The token holder will have to verify that they have permission to use the device.
On a regular basis, most likely monthly, each opt-in token holder will have their opt-in activity analysed in relation to:
• Uptime availability of the devices;• Data capacity (how much data can be supplied to their devices, how quickly);• How much storage the devices have made available;• How much data they have actually stored during the month;• How much stored data has been supplied back to the network;• How much processing power the devices have made available;• How much data processing the devices have done during the month divided into: o Policy assessments and reviews (smart and deep data in relation to big data); o Network management; o Transaction verifications; o Big data analysis.
Opt-in activity data will be weighted according to value to the network. At this point the likely order of weighting will be:
• Uptime availability. 24/7 will be most valued and highly weighted;• Network management;• Policy assessment;• Transaction verification;• On-demand data supply to the network;• Data capacity;• Processing capacity;• Data storing of the above;• Big data processing;• Other storage;• Storage capacity.
Each opt-in token holder’s weighted activity is then referenced to the total pool weighted activity to given that token holder a percentage of total weighted activity.
There may be further weighting in relation to country or geographical areas, or assessment of weighted activity may be by region.
Gross revenue will come in from premium payments.
The options for management of this revenue in relation to payments to opt-in token holders are:
- A percentage of gross revenue goes to the opt-in pool; o This can be up to 100% given that BAO has retained significant coins and can opt-in to supply services to the network;
• This represents “skin in the opt-in game” for BAO and further aligns BAO with token holders; o A percentage of nett revenue goes to the opt-in pool; o A percentage of profits goes to the opt-in pool.
Which opt-in payment management system is used at any given time is dependent on:
- Protecting the viability of the insurance business; o BAOcoin viability is directly related to the BAO Insurance viability; o Balancing returns to token holders with the needs of the claims fund and the other expenses of the insurance business.
The aim of the management of the opt-in payments is to first get the market cap of BAOcoin to $100 billion as rapidly as possible and after that to support a sustainable level of market cap growth.
21
APPLICATION FOR A POLICY SCREEN
BAO SCREENSHOTS
OPT-IN COMPUTER POWER SCREEN
22
BUY/SELL/TRANSFER BAOCOIN SCREEN
BAO STATS SCREEN
23
MAKE A CLAIM SCREEN
THE BAO ADVANTAGES
• EASE OF ACCESS• EASE OF USE• FAST RESULTS• EASY TO CHANGE
• AFFORDABILITY• ACCURACY• TRANSPARENCY• SECURITY
24
BAO TRANCHES
1ST TRANCHE – October 2018
2ND TRANCHE – December 2018 Target
Tranche size and timing is indicative only and is dependent on numerous future variables.
BAO gives no guarantee as to the size, timing or success of any tranche.
The tranches have been designed to balance value for money for BAOcoin purchasers with the large capital requirements of a serious insurance venture and the retention of coins for future policy and claim use.
The purpose of the 1st Tranche is:
• Establish market appetite for the proposed insurance offering;• Further hires;• Progress platform development;• Provide funding for the broader based 2nd tranche;• Regulatory requirements for the USA.
The first tranche will likely:
• Offer 133m BAOcoins at a price of €0.06 EUR per coin;• Occur in October 2018.
The purpose of the 2nd Tranche is:
• Expanded platform development;• Further hires;• Deeper market research;• Full jurisdictional and regulatory investigations;• Strategic positioning (including but not limited to): o Data sourcing or insurance related.• Exchange preparation.
The 2nd tranche will likely:
• Offer 333m BAOcoins at €0.15 EUR per coin;• Target December 2018.
The purpose of the tranches is to give earlier purchasers added benefit and to demonstrate progress to the market over the course of the tranches, while over the 4 tranches providing enough capital to allow BAO to meet its targets as fast as possible.
In this regard we believe we have achieved the ideal balance, with a weighting toward value for money for BAOcoin purchasers.
3RD TRANCHE – April 2019 TargetThe purpose of the 3rd Tranche is:
• Establish the initial Insurance structure;• Establish the initial claims fund team and structure;• Initial seeding of the claims fund;• Establish regulatory and jurisdictional positions;• Strategic positioning/investments(including but not
limited to): o Data sourcing or insurance related; o Data sourcing or insurance related;• Exchange expansion.
12.
25
4TH AND FINAL TRANCHE
POST EXCHANGE LISTING
The 3rd tranche will likely:
• Offer 333m BAOcoins at €0.30 EUR per coin.• Target of April 2019.
Targeted progress by 3rd tranche:
• Product prototypes;• Initial insurance forecasts;• Jurisdictional clarity.
The purpose of the 4th Tranche is:
• Preparation for exchange listing;• Final hires;• Full initial funding of claims fund, allowing for reinsurance treaties;• Strategic positioning/investments/acquisitions (including but not limited to): o Data sourcing or insurance related;• Full exchange listing.
The 4th tranche will likely:
• Offer 1.6b BAOcoins at €0.50 EUR per coin;• Target August 2019.
Targeted progress by 4th tranche:
• Insurance team and processes ready, including jurisdictional processes;• Claims fund team and processes ready;• Alpha version of product reading for testing.
Alpha Testing:
• Open only to purchasers of BAOcoin during the Token Launch;• Ability for testers to earn further BAOcoins the more they test;• Purpose: test the fundamentals of the platform.
Beta Testing:
• Open to anyone with a BAOcoin;• Ability for testers to earn further BAOcoins the more they test;• Alpha testers earn more for time spent;• Purpose: uncover any issues with the platform.
Go-Live:
• Anyone will be able to purchase cover;• BAOcoin holders will be able to opt-in to supply computing power;• If further testing only open to Beta testers to earn BAOcoins;• Fully operational.
BAO is aiming to hit major milestones every six months from Token Launch – this includes expanding the team, developing the product and building a community of stakeholders to ensure the long-term success of the platform. The ultimate aim is for BAOcoin to be within the top 10 cryptocurrencies within 1-5 years of listing on the exchanges. This is a target only and depends on a number of factors outside of the control of BAO, including reaching each tranche’s capital raising target.
BAO aims to implement a life insurance equity policy based on the BAOcoin which will provide benefits for claims based on the increasing value of the BAOcoin.
BAO also aims to expand into further insurance segments over time, including but not limited to vehicle insurance, travel insurance & medical insurance. Some of these offerings will involve collaboration with existing underwriters and providers to use the BAO platform for risk reduction, efficient processing and lowering costs (and improving margins).
26
We provide the following as speculative commentary and note that the only price BAOcoin can control is the price we sell the tokens for.
The aim of BAO is to achieve a $100 billion USD market cap for BAOcoin.
We believe this can occur through upward price pressure from the following areas:
1.BAOcoin may act as a store of wealth similar to other cryptocurrencies;2.Earnings by BAOcoin holders for opting-in to supply computing power;3.By association with the growth of the insurance business;4.Through BAOcoins being purchased to receive policy discounts;5.Through the BAOcoin equity life insurance policy;6.Through purchase by the platform of BAOcoin for premium payments;7.Through prominence as one of the leading cryptocurrencies.
BAOcoin as a tradable token aims to be able to be purchased and sold on a secondary market following listing on the exchanges. This means that it’s value will ultimately be determined by market mechanisms.
The sale of tokens has been discounted for early adopters.
BAOcoin allows the owner to receive payment for supplying computing power. Such payments will be influenced by supply and demand dynamics. Payment will be a function of tokens held and computing power provided.
The processing power of computers should continue to increase with time while costs to secure processing power will drop. Both factors can increase the value of the opt-in component of the BAOcoin and therefore the BAOcoin value.
If the costs of power generation also fall in the future, this further impacts on this component and can provide further increased value to the opt-in component of BAOcoins.
During the course of the Token Launch and in the early stages following listing on the exchanges, it will be our ability to communicate and deliver on milestones, combined with market sentiment that will influence prices.
At later stages, it will be the performance of the insurance business, the use of the coins by the network, the stature of BAOcoin as a cryptocurrency, its stability as a store of value, and the fees paid for the opt-in that will impact upon market sentiment to influence prices.
BAOCOIN MARKET VALUE13.
27
The Claims Fund requires a significant amount of coin retention to protect against future unforeseeable events in relation to the Insurance Business such as years when claims significantly exceed yearly norms.
The coins retained by the Claims Fund will allow the Insurance business to cope with these spikes in claims.
The value of tokens is directly connected to the success of the associated business, as observed by numerous cryptocurrency commentators. As such it is manifestly within the interests of BAOcoin holders that all measures that increase the safety of the insurance business are considered. This includes protecting the Claims Fund.
The 35% of BAOcoins held by the Claims Fund will be “off market” and will not be used except in an extraordinary setting such as contemplated above. This effectively makes them equivalent to being “burnt” as they will not be offered to the market under normal market conditions, and the aim is that they will never be offered to the market.
If after 5 years of operations (or potentially earlier), the Claims Fund is secure enough, the situation will be assessed by BAO Insurance and if possible a “burn strategy” for the 35% of coins retained by the Claims Fund will be implemented.
BAOcoin token holders should consider the observation of numerous cryptocurrency commentators that the more widely held a token is, the more market visibility it has and the more likely it is to be adopted by a broad selection of exchanges, and that these factors argue against the kind of burn strategies that are currently popular.
BAO will consider BAOcoin buybacks following listing, but it is anticipated that until the Claims Fund is secure that these coins will be put into cold storage with the other Claims Fund BAOcoins.
The Marketing & Growth funds will only be offered to the market in the setting of significant rises in the value of BAOcoin, such as following the market announcements that will result in the trajectory to a $100 billion market cap.
The Team and Advisor BAOcoins will be held in escrow for one year following listing on the exchanges.
The Network Operation BAOcoins will facilitate availability of BAOcoins to ensure network operation and as such are not expected to affect the market value of BAOcoins in a negative way, but could supply upwards price pressure.
BAOCOIN DISTRIBUTIONToken Launch Sale
Network Operation
Team & Advisors
Claims Fund
Marketing & Growth
@ 30%
10%
15%
@ 35%
10%
14.
28
Dates and order of objectives are subject to change.
September 2018
October 2018
December 2018
Following PrototypeTarget of April 2019
Following Alpha ReadyTarget of August 2019
Target of 4th Quarter 2019
Target of 2020
Target of 2021
BAO ROADMAP
White Paper Released
Following 1st Tranche:
1st Tranche:
2nd Tranche:
3rd Tranche:
4th Tranche
Alpha Testing
Beta Testing
Go Live Full Release
Following 2nd Tranche:
Following 3rd Tranche:
Following 4th Tranche:
Jurisdictional & Regulatory FinalisationCommence Reseller StructuringCommence Exchange Negotiations
Reseller ContractsJurisdictional & Regulatory EstablishmentSmart/Big Data AcquisitionProduct to PrototypeInitial Exchanges Contracted
Product SandboxingProduct to Alpha ReadyEstablish Claims FundCommence Reinsurance NegotiationsExchanges Finalised
Full Claims Fund CapitalisationExchange Listing & ExpansionFinalise Alpha ReadyProduct Access to BAOcoin holdersWorking Platform model on WebsiteReinsurance TreatiesStrategic Partnerships, Investments & Acquisitions
15.
29
ANCIENT WORLD
THE MODERN INSURANCE COMPANY
HISTORY
Insurance has a colourful, stop-start history dating back to the ancient world. Initial attempts at insurance centred around the protection of commercial interests, especially shipping cargos.
Life insurance has its first instance in ancient Greece where “benevolent societies” were formed to care for families as well as pay the funeral expenses of members.
Another early example of life insurance lay with Gaius Marius, the uncle of Julius Caesar and creator of the final form of the Roman Army, who formed burial amongst the troops, where surviving members would pay for funeral expenses.
Edward Lloyd’s Coffee House, opened in 1686 and the origin of the modern Lloyd’s of London, was a popular gathering place for ship captains, owners and merchants and became the leading locale for the arrangement of marine insurance.
In 1691 a group of marine insurance underwriters opened an office on Lombard Street, and the modern insurance company was born, which subsequently evolved into the sophisticated operations we see today.
Gaius Marius
Lloyd’s Coffee House
INSURANCE
THE MODERN LIFE INSURANCE FUNDLife insurance in the modern era evolved in multiple places in parallel. In 1672 the Scottish Parliament passed the Law of Ann which required church parishes to offer the families of deceased priests a payment to help with their families but the payments were not enough and some parishes were going broke due to the obligation.
Then two priests, Robert Wallace and Alexander Webster, who enjoyed the odd tipple or two together, as Scots are want to do, who despite being famous for their drinking prowess were also maths aficionados, worked out how to fund the Church’s obligations without losing money.
The Perpetual Fund was born, with its first incarnation, the “Scottish Ministers’ Widows’ Fund”. But even better than that, these two Scottish gentlemen, with help from Colin Maclaurin, professor of mathematics at the University of Edinburgh, also founded the actuarial science, by first assembling the data on life expectancies as well as data on payments. They then constructed “life tables” that allowed application of the statistical data to premiums and payouts, and the great thing was – it worked.
Wallace and Webster’s legacy lives on in the actuary tables used by Insurance Firms word-wide to calculate premiums. Amazingly, the fund still exists today and prominently via a parallel organisation, the Scottish Widows fund, now a subsidiary of Lloyds Banking Group.
16.
30
Example of a Life Expectancy Table
Age related premium increases
ENGLAND BROADENS HORIZONSThe English mathematician James Dodson, initially rejected for life insurance based on his age, was the first to demonstrate that premiums could be statistically based on the individual attributes of the applicant and later Edward Mores put Dodson’s ideas into action by founding the world’s first mutual fund.
Amazingly, the fund still exists today and prominently via a parallel organisation, the Scottish Widows fund, now a subsidiary of Lloyds Banking Group
Figure 5 -
Figure 6 -
31
AMERICA: INSURANCE FOR EVERYONEThe first insurance offered in the Americas was fire insurance in Charleston, South Carolina in 1735 and later the first life insurance was offered by Churches for their ministers.
In 1875 the Widows and Orphans Friendly Society, which eventually became Prudential, founded in Newark, was the first company in the US to offer life insurance to the working class.
Group life insurance was born when Equitable Life Assurance Society (now AXA) wrote a policy covering all 125 employees of the Pantasote Leather Company without requiring individual applications or medical exams.
Later the financial crisis of 1837 spurred the creation of mutualised funds, with the first life insurance company being formed in the 1840s. Following this, women were allowed to purchase life insurance and with wider acceptance, life insurance experienced a boom period. Many of today’s largest life insurers were formed during this period, including Metlife, New York Life, MassMutual and John Hancock.
America introduced insurance for everyone.
AMERICA: THE 20TH CENTURY
THE DEMOCRATIZATION OF INVESTMENT
Life insurance sales rose dramatically after World War 1, peaking at $117 billion in policies by 1930. By the Great Depression there were more than 120 million life insurance policies, equivalent to one policy for every person in the US at the time.
The end of World War II and the economic boom that followed boosted sales of life insurance in the US. By the mid-1970s, 72% of the adult population of the United States and more than 90% of all families owned some for of life insurance.
In the past, investment opportunities were only open to the wealthy. The modern age has seen the democratization of investment, and this includes life insurance.
Life insurance is a form of investment, but often isn’t seen as such. Life insurance will always be a staple of the investment landscape, allowing families to shift mortality risk to the capital base managed by the life insurer.
Figure 7 -
32
-10%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
5%
10%
15%
20%
-5%
0%
Swiss Re Institute.
Swiss Re Institute.
Life None Life
Emerging markets Advanced markets
Total Source:
Source:
ChinaEmerging Asia excl ChinaLatin America and the CaribbeanWestern Europe AfricaMiddle East and Central AsiaCentral and Eastern Europe North AmericaAdvanced AsiaOceaniaWorld
2.4ppt0.4ppt0.1ppt
0.05ppt0.02ppt0.02ppt0.0ppt
-0.06ppt-0.17ppt-0.24ppt
2.5%
CURRENT LEVELS OF LIFE INSURANCECURRENT STATE OF PLAY
Recent studies have shown that as of 2010 30% of US households have no life insurance at all, and only 44% of US households had an individual life insurance. This marks a 50-year low for the life insurance industry.
CURRENT SIZE OF LIFE INSURANCEIn 2016 global direct life insurance premiums totalled USD $2.617 trillion9 , an increase of 2.5% in real terms from 2015. Total global insurance is around $4.5 trillion, as such life insurance alone represents 58% of all insurance.
HIGHLIGHT: This demonstrates the current opportunity in the 1st world markets.
HIGHLIGHT: This is why BAO will focus on life insurance first.
Global real direct premium growth. 1980 - 2016. (Click chart to go to sigma explorer.)
Contribution to real life premium growth by region, 2016
Figure 8 -
Figure 9 -
33
China Life Insurance, China
AIA Group, Hong Kong
MetLife, United States
Ping An Insurace, China
AXA SA, France
Prudential plc, United Kingdom
Prudential Financial United States
Manulife Financial, Canada
China Pacific Insurance, China
Assicurazioni Generali, Italy
Great West Lifeco, Canada
Aflac Inc, United States
Aviva plc, United Kingdom
Legal & General, United Kingdom
Power Financial, Canada
Sun Life Financial, Canada
Samsung Life Insurance, South Korea
Cathay Financial, Taiwan
Aegon NV, Netherlands
Dai-ichi Life Insurance, Japan 17.7
18.25
21.11
21.4
23.2
23.42
23.47
25.47
26.53
29.77
33.2
34.65
38.06
42.75
59.62
61.84
62.6
62.86
66.11
81.53
0 10 20 30 40 50 60 70 80 90
market capitalization (in billion U.S. dollars)
Various sources (thebestlifeins.com)© Statista 2015 Worldwide (as of September 19,2014)
Quelle::Additional information:
Largest life insuarcne companies worldwide as of September 2014, by market capitalization (in billion U.S. dollars)
Figure 10 -
34
MACROECONOMIC TRENDS
CHINA
Global economic growth continues to trend upwards and employment levels are rising, both of which are favourable for premium growth. On the converse, low interest rates continue to pressure profits from claims-fund investments.
In 2016, China was the 3rd largest market for life insurance with USD $466 billion in total premiums. With the middle class in China rapidly expanding, the Chinese market represents the greatest opportunity for BAO.
The global market share of Chinese premiums is expected to increase from 5% in 2012 to 13% in 2023.
AT: Austria, AU: Australia, BE: Belgium, CH: Switzerland, DK: Denmark, FL: Finland, ID: Indonesia, NL: Netherlands, NO: Norway, LU: Luxembourg, PL: Poland, PT: Portugal, RU: Russia, SE: Sweden, SG: Singapore, TH: Thailand
North America Western Europe Advanced Asia Emerging Asia
Latin America
Oceania Africa
United States France Spain
United Kingdom
Germany
NL
Italy
Iceland
BE
SE
DK
LU
NO SG
IDTH
AT
PT
FL
CH
AURU PL
Japan
South Korea
BrazilTaiwan
Hong Kong
SouthAfrica
China
India
Can
ada
United States
USD
bill
ion
(201
5)
0
5
10
15
20
25
30
35
40
EMEA APACAmericas
2014
North America
Latin America Oceania Africa Middle East and Central Asia Central and Eastern Europe
Western Europe Advanced Asia Emerging Asia
2015 10 year avg. Aon Benfield AnalyticsSource:
2015 Insured losses by region
Total premium volumes by region, 2016.
Figure 11 -
Figure 12 -
35
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1962 19621982 19822002 20022012 20122023 2023
Advanced Asia China
Western Europe Emerging Asia, Excl China
North America, Oceania
Non-Asian Emerging Markets
% of global life premiums % of global non-life premiums
Swiss Re Economic Research & Consulting Source:
fore
casts
fore
casts
Fixed-income securities
Real estate, buildings under construction and building land
Mortgages
Investments from unit-linked life insurance
Collective investments
Equities and similar investments
All other investments 35,823
10,124
16,408
19,596
31,381
40,144
184,941
With the backing of the BAOcoin, BAO can afford to be more aggressive in its asset allocation and will look to invest in alternative assets, especially those around longevity research, as well as being able to take a position in cryptocurrencies.
9
ASSET ALLOCATION
Premiums written in life and non-life by regions (1962-2023)Figure 13 -
Asset allocation of life insurers 2016. (in CHF millions)Figure 14 -
36
Insurance coverage in the developing world remains woefully low due to a combination of lack of availability and lack of affordability.
BAO aims to remedy this by providing developing world solutions in partnership with high-profile micro-loan organisations that have been operating in this space for decades.10
For instance, it is not worth a large multi-national bothering with the insurance of a $300 house in Bangladesh for premiums of $0.30 a month, but for BAO, without the traditional insurance overheads, this becomes feasible.
Risk reduction programs have been implemented worldwide by traditional insurers with encouraging results.
The Vitality Program rewards policy holders for submitting personal data to demonstrate they are engaging in risk reduction.
Through this program, Discovery has found many uses for the data it collects:
• Reduce the risk profile of its portfolio through the attraction of lower risk customers and reducing the risk of existing customers through incentivisation;
• Improved customer relations through providing customers will relevant information on how to improve their lifestyle;
• Higher margins through more accurate underwriting and pricing;• Greater cross-selling and bundling of products.
DEVELOPING WORLD
RISK REDUCTION PROGRAMS12
DISCOVERY LIMITED, SOUTH AFRICA: VITALITY PROGRAM
MLC offers a smartwatch to policy holders to track exercise and sleep and if the user achieves their target goals they can receive a 10% discount on their premiums.
As genetics testing becomes more sophisticated and able to identify a broader range of conditions it will come to play an increasing role in various types of insurance.
As early as 2010, Athene (formerly Aviva) studied whether non-traditional data could be used to replace medical exams and found that certain data was as effective as blood and urine tests in identifying potential health risks.
MLC LIFE INSURANCE, AUSTRALIA, ON-TRACK PROGRAM
GENETICS TESTING
ATHENE USA
THE ON-DEMAND ECONOMY12
PREMIUM COSTS
37
With every passing year, society becomes more and more reliant on the ODE, from Amazon to Uber, from AirBnB to EBay, the ODE is now firmly a part of the Advanced World societies.
Central position in the market as the glue
between risk and capital
Over time, all aspects of life will become a part of the ODE, some to a greater degree and some to a lesser degree.
Data &Analytics
Risk Capital
Technologypartnerships
It may be that in 20 years time, all insurance is provided online through automated processes.
The ODE is already changing expectations for insurance with an increasing number of digital aggregators hosting products from a variety of insurance providers.
Insurance is one area that is anticipated to become fully ODE with time, and BAO aims to be at the forefront of that movement.
As a rough guide, a healthy 35 year old will pay about $500 USD per year for a $500,000 policy. A healthy 55 year old will pay about $1,300 a year and at 65 about $7,000 a year.
BAO will seek to reduce these prices by up to 65%.
Data & Analitics, Risk, Capital, and Technology partnerships diagram.Figure 15 -
38
FUTURE TRENDS
What follows applies to the Swiss Life Insurance market, but can be extrapolated globally13:
Global Life Insurance premiums grew by 2.5% in 2016, down from 4.4% in 2015 due to contractions in advanced market premiums. This is still ahead of the 10-year average of 1.1% growth.
Life premiums in emerging markets grew by 17% in 2016, with China representing 66% of this growth.
Goup life occupational pension schemes 23,285,933 24,835,540 -6.3% 71.1%
13.4%
1.3%
5.0%
0.3%
1.0%
1.5%
0.0%
4.7%
1.7%
32,743,217 34,724,076
1,635,109 1,508,310 8.4%
1,549,175 1,594,764
4,903 4,900
101,520 243,587 -58.3%
324,510 367,549 -11.7%
543,817 504,176
494,266 483,162 2.3%
0.1%
-2.9%
7.9%
-5.7% 100%
— — — —
—
4,375,737 4,682,422 -6.5%
428,247 496,666 -13.8%
Classical individual capital insurance
Classical individual annuity insurance
Unit-linked life insurance
Life insurance linked to internal investment positions
Capitilization and tontines
Other life insurance segments
Individual life insurance not prorotatble on the branches
Health and causalty insurance
Foreign branches
Reinsurance accepted
Total
PREMIUM TRENDS
2016Percentage of total 20162015 +/-
BAO Opportunity: BAO aims to provide policies that are cheaper than current offerings, up to 40% rising to a theoretical limit of 65%. This will be attractive to consumers in advanced markets, especially those in the 25-45 year old age groups.
Gross premiums booked. (in CHF thousands)Figure 16 -
39
No Data
<-10.0%
-10.0% to -5.0%
-5.0% to -2.5%
-2.5% to 0.0%
0.0% to 2.5%
2.5% to 5.0%
5.0% to 10%
> 10.0% Swiss Re InstituteSource:
REGULATORY ENVIRONMENTContinues to become stricter to promote financial stability.
BAO aims to conduct a full jurisdictional review following the second tranche, to start preparing its systems and teams for all global jurisdictional matters, including the GDPR.
The General Data Protection Regulation is being introduced to the EU in May 2018.
The GDPR strengthens the rights already present under the Data Protection Act (DPA) and includes:
• All organisations handling the personal data of EU-based individuals, regardless of the company’s location must comply with GDPR;
• Such organisations must adopt “privacy by design” by building in data protection into their business processes and systems;
• Such organisations must appoint a Data Protection Officer if their scale is large enough;• Individuals will be able to: o Be informed about how their data is being used; o Have their data destroyed where it is no longer necessary or they withdraw consent; o Have their data ported to another provider if they request; o To check risk of damaging outcomes of automated processes.
GDPR
This is again an advantage for BAO as BAO is able to implement policies and procedures based on the current regulatory landscapes.
Being able to build systems from ground up gives BAO an advantage over current insurers who have to apply digital fixes to outdated systems.
Life real premium growth, 2016.Figure 17 -
40
Reinsurance is an essential component of the insurance industry. Reinsurance allows direct insurers to defray risk, or expand business beyond what their capital base might otherwise allow.
REINSURANCE
BAO is in a strong position to seek favourable reinsurance, with strong underlying metrics and a reinsurance market that is looking for business.
In recent years a lot of non-traditional capital has entered the reinsurance market looking for higher yields. This includes pension funds worldwide. This is increasing capacity and putting downward pressure on pricing, all of which is good for BAO.
The credit quality of the reinsurance market remains high. But with limited scope for price increases, reinsurers are focused on expense and capital management efficiencies to boost their earnings levels.
Individual company reports, Aon Benfield AnalyticsSource:
2007
-17% 18%18%
11%
-2%7%
6%
-3%
$4018 $3408 $4008 $4708 $4558 $5058 $5408 $5758 $5658
2008 2009 2010 2011 2012 2013 2014 3Q 2015
Big Data refers to the massively increasing volume, velocity and granularity of data sets that are being accessed and linked.
“… the greatest impact of [big data] disruption is likely to be felt in the insurance sector.”15
Increased awareness of consumer behaviour, gleaned from the capture and analysis of higher volumes of detailed data will allow insurers to tailor the information they provide to their customers in the form of the risks they face, how to reduce those risks and how to reduce their insurance premiums.
The use of Big Data raises serious privacy concerns and questions. BAO is committed to maintaining the highest standards in the protection of individual privacy and the management of private information.
Insurers rely on data and statistics to determine the prices of insurance policies and where this data is costly to acquire (eg. medical examinations) and to process (eg. via human intervention) the price of insurance policies will be high. Improved data will allow insurers to price more precisely, ultimately down to the individual insured.
Current pricing factors used in insurance to price a group of insureds will be replaced by more accurate predictors of individual risk characteristics.
BIG DATA14
BAO aims to reduce the cost of premiums through automation of processing (up to 40% reduction) and the use of Smart Data (further savings).
Change in global re-insurer capitalFigure 18 -
41
Patterns generated by phones, appliances and other devices that can provide insight into events and habits.
Sentinment, relationships and preferences that consumers
broadcast daily.
Economic trends and global events that impact investments and buying habits.
Untapped business knowledge hidden in documents and emails.
Conversations and images that improve customer experience through
captured attitudes and beleifes.
Data captured through business operations wating to be enhanced with unstructed data from the outside world.
Big Data
Everyday Communication
Social Media
News & MarketsText
Multimedia Business Inteligence
Operational Data
PwCSource: 16
Precise assessment of the risk factors for an individual will not allow prediction of future events or when they might happen, and thus the basis of pooling risk in insurance funds to spread this risk will continue to be a valuable service to the community.
RISK POOLING
DIGITAL TRENDS
A JD Power study released in October 2016 found that 27% of life insurance customers (and 33% of baby boomers) are now communicating with their life insurers via digital channels17. Digital distribution in insurance is growing, but for the time being largely consists of online application forms. Fast applications are largely related to no-medical policies, with higher premiums.
BAO cover aims to provide the quality and security of fully underwritten policies without the high cost and complex process.
Automation of the underwriting process has been in place for many years, and while this increases the efficiency for insurers it often doesn’t have an impact of the length of time or difficulty for consumers.
Automation of information gathering is touted as being able to reduce application times from months/weeks to hours/mins but so far this has not penetrated the market to any significant degree.
BAO aims to change all of this. With a fully automated application/offering process we expect the process to be a matter of minutes, or even instant in the case of automated offerings.
DIGITAL OFFERINGS
Tapping into rich new sources of dataFigure 19 -
42
A current trend in the insurance industry is to adopt measures that help with reducing claims. Examples include discounts on health insurance for gym membership and dna profiling.
The design of the BAO algorithm is to appropriately price the life risk for a total population not to look for ways to reduce cover or limit offers to a specific segment.
NOT JUST COVERING, BUT PREVENTING RISK
BAO aims to also examine similar methods for life insurance, including longevity research and benefits to policy holders for life-extending activities.
Other insurance token offerings have focused, for example, on providing a link between current non-blockchain insurers, or between insurers and brokers.
Insurance companies that are interested in blockchain are producing in-house products and not offering involvement to the wider crypto community.
The strongest initiative is the B3i project founded in October 2016 by Allianz, Munich Re, Swiss Re, Zurich and Aegon. In March 2017 a proof of concept around Property policies and claims was commenced. You can view their progress at https://b3i.tech.
It is a well known fact that industry disruption does not come from incumbents.
BLOCKCHAIN IN INSURANCEAs of the date of this writing, BAO is the only policy provider to open their business to the cryptocurrency market.
INSURETECHAlong with fintech and regtech, insuretech is one of the new specialised start-up sectors.
Over 550 insurtech start-ups have been founded so far18 with nearly $14 billion invested to date in the sector.
The majority of insuretech startups are focused on improving customer interaction with existing insurance companies.
The newest insurtech companies are attempting to provide blockchain solutions for insurance incumbents.
None of the insuretech companies researched offered life insurance policies directly to consumers but instead aimed to act as intermediaries between customers and existing providers.
MACHINE LEARNINGData Scientists are an essential component of the predictive modelling necessary for efficient insurance management. Machine learning is increasingly being used to supplement the data scientists role, allowing repetitive tasks to be either fully or partially automated, these include:
• Model fitting;• Model diagnostics;• Model deployment;• Feature transformations;• Exploratory data analysis.
43
CURRENT BLOCKCHAIN - INSURANCE ATTEMPTSThe majority of attempts to integrate blockchain into insurance are in their infancy and are proprietary, meaning that individual companies are developing blockchain integration and strategies but this is not part of a broader based blockchain product available to consumers.
Largely, the implementations are to use blockchain to assist with current insurer’s record keeping rather than as a holistic blockchain offering.
Examples include big accounting firms developing solutions for current insurers, a large US based insurer partnering with the world’s largest IT services provider to create the first multinational smart contract based insurance policy.
India’s second largest private general insurer launched a blockchain based product for overseas travel policies, which allows customers to receive their claims instantly without filing for a flight delay.
A Berkshire-Hathaway owned reinsurer has partner with a London based vendor to develop a blockchain platform for life and health insurance clients.
Alternatively, other companies (including some ICOs) are attempting to place themselves as middlemen between the insurers and other insurers and customers using blockchain.
A recently launched demo app in Singapore of a P2P DAO marketplace for smart contracts based consumer insurance.
At a recent insurance blockchain hackathon organised by Travelers (via Simply Business), several new blockchain based insurance solutions were introduced: automated claims payouts based on weather APIs and IoT tools, insuring ICO investors against cyber attacks, improving reinsurance market efficiencies.
Two Japanese bitcoin exchanges recently launched insurance products to cover losses tied to failed transactions.
Currently developers are circling the target without hitting it, perhaps because they see a broad-based direct-to-market insurance offering as too challenging and are instead after quick and easy results. BAO has no such fears!
44
INSURANCE RELATED ICOS
The iXledger platform offers a marketplace for insurers, reinsurers and
brokers to trade insurance products directly
DAO focused on product insurance.
Platform to allow 3rd parties to build insurance
predictive models.
Blockchain flight delay, social & crop insurance Pet crowdsurance
Crowdsurance
ICO Jul 11-13 2017 ICO not commenced ICO Oct 15 - Dec 25 2017 ICO Nov 15 - Dec 15 2017
$17.27m $507k $4.22m
Trading marketplace for insurance policies
ICO platform offering insurance as a component.
Social proof guarantee for insurance.
Travel delay insurance.Insurance for the unbanked and crypto-assets.
Health insurance claims processing.
Peer to peer insurance initially focusing on
employment insurance.
Car theft insurance Health insurance with AI Virtual Medical Assistant
Insurance for crypto investors
German insurance brokerage.
Community focused blockchain life insurance
Democratizing healthcare and vehicle insurance.
Peer to peer insurance.
ICO Nov 6 – Dec 5 2017
ICO concluded Feb 06 2018
ICO concluded Feb 06 2018
ICO commences 15 May 2018
ICO not commenced ICO Aug 20 – Oct 4 2017 ICO 2 April - 31 May 2018
ICO concluded Nov 11 2017
ICO commences June 01 2018
ICO concluded April 01 2018
ICO concluded Dec 15 2017
ICO concluded Dec 25 2017
ICO concluded Dec 30 2017
ICO commenced Dec 25 2017
$1.55m Unknown result Unknown result
BAO remains the only serious insurance cryptocurrency offering insurance directly to customers.
45
Insurers are expected to focus initially on using blockchain in areas such as payments, claims processing, administration and back-office operations (versus underwriting and pricing).
Blockchain will enable insurers to:
• Offer low-cost insurance products catering to potentially high-demand sectors such. as flight delays and cancellation, flooding and weather disruptions.
• Disintermediating middlemen (eg brokers).• Recording real-time premium payments and receipts across shared networks.• Providing regulators with controlled policy views to demonstrate compliance.• Improving claims adjudication through a robust validation engine.
Whereas BAO aims to use blockchain for everything that is applicable.
FUTURE BLOCKCHAIN-INSURANCE TRENDS
Stuart Haber and W. Scott Stornetta were the first to describe a cryptographically secured chain of blocks in 199119. Famously, Satoshi Nakamoto (whether one person or a group) conceptualised the blockchain in 200820 and implemented this the following year in Bitcoin. Recently, Bitcoin has captured the imagination of the wider public, with historic price rises.
HISTORY
BLOCKCHAIN
Bloomberg, World Gold Council*As of 19 January 2018 Source:
20,000US $
18,00016,00014,00012,00010,0008,0006,0004,0002,000
0
01/2017 03/2017 05/2017 07/2017 09/2017 11/2017 01/2018
Ethereum was launched 30 July 2015 with a nearly Turing-complete language for its smart contracts The Ethereum crowd-sale in July 2014 is considered to be the first TGE21.
Already within the first 3 months of 2018, almost $5 billion USD has been raised by ICOs.
With Ethereum the ICO age was born along with the next generation of smart contracts.
SMART CONTRACTS AND ICOS
Smart contracts are essential to the provision of blockchain insurance.
17.
Bitcoin price chart between 2017 - 2018Figure 20 -
46
2018 has seen widespread scrutiny of the cryptocurrency markets by regulators and governments.
It is likely that at some point in the future, ICOs will become regulated, possibly heavily regulated.
This has pros and cons. It will disincentivise those who are disingenuous or not ready, but at the same time, just like more traditional funding, it will cause a lot of great ideas to die on the vine.
For investors as well increased regulation may see the loss of opportunity, as is the case with more traditional investing, where big opportunities are the exclusive province of the wealthy and well connected.
2017 was the year of Crypto:
• Total Cryptocurrency Market Cap reached over 500 billion USD;• Bitcoin almost hit $20k;• $3.88 billion USD was raised from 210 TGEs22, compared to $95 million in 201623 from 43 TGEs.
These trends are set to continue, with $5 billion USD of ICOs within the first 3 months of 2018 alone.
REGULATORY
CRYPTO 2017
FUTURE TRENDS
It is estimated that 50% of the Japanese population holds some form of cryptocurrency.
As of January 2018, the yen accounts for 56.2% of BTC24.
South Korea is not far behind, where cryptocurrency trading is now seen as a viable career option.
China accounts for 80% of BTC trade volume.
2017 saw cryptocurrency capture the world’s imagination.
Options for those who want to enter cryptocurrencies continue to be expanded on and increase in sophistication.
As a result, more and more are entering the market, including ICOs, and the market continues to expand.
This includes institutional investors, who can no longer ignore the growing size of the cryptocurrency markets.
MARKET
BAO aims to benefit from this as a destination for new funds entering the market
CURRENT STATE OF PLAYCrypto continues to move forward strongly, with $4.8 billion raised via ICOs in just the first 3 months of 2018.
The establishment also continues to push-back, with banks refusing to deal with crypto-related clients, as well as Google, Facebook and Twitter announcing ICO advertising bans.
This Is to be expected, as blockchain based companies threaten the current business models of incumbents.
BAO aims to offset this by eventually allowing other insurance companies to offer their products on its platform.
Stable coins attempt to avoid the massive price fluctuations of other cryptocurrencies by pegging their value to a stable asset, such as a fiat currency.
TECHNOLOGYSTABLE COINS
47
As ICOs continue to flourish, more and more new players will focus on the opportunities in the Business to Business market.
BTC is focusing on off-chain solutions such as the Lighting Network.
BCH is focusing on on-chain scaling solutions, such as increased block sizes.
ETH is transitioning to PoS and considering technologies such as sharing and a layer 2 solution similar to Lightning Network called Raiden.
Altcoins are experimenting with different consensus algorithms such as DPoS25.
FASTER AND CHEAPER TRANSACTIONS
BAO
GENERALInsurance companies integrating blockchain into their current business models is great, but gives BAO a bit of a yawn.
Blockchain for travel insurance is a great proof of concept for a very different market but the approach is the same – use trusted data sources to streamline customer solutions.
We know that the one other group looking at insurance DAO will fall away, because they are dependent on the current insurers for their success.
THE MARRIAGE OF INSURANCE AND BLOCKCHAIN
It is the belief of BAO that insurance and blockchain/smart contracts are a natural marriage.
That with deep data and the blockchain, the offering of insurance can be largely automated, possibly with time, fully automated (the DAO).
The benefits that BAO aims to provide to consumers are:
• Insurance cover where none currently exists;• More accurate insurance cover;• As a result, better pricing;• Faster turnarounds, so that getting insurance is a joy instead of a hassle;• Automatic offering where possible and appropriate;• Fully accurate record-keeping via the blockchain;• The ability for the community to contribute computing power and receive payment;• The ability for other insurers to use our platform;• Automatic claims processing where possible and appropriate.
The BAO team has the skills and experience to implement this audacious goal.
FURTHER APPLICATION TO B2B MARKETS
48
WHAT THE PRECEDING DATA SHOWS
THE ADVANCED WORLD IS UNDER INSURED IN REGARDS TO LIFE INSURANCE
THE WHOLE WORLD IS SIGNIFICANTLY UNDER-LIFE INSURED
THE OPPORTUNITIES IN CHINA ARE SIGNIFICANT
THE OPPORTUNITIES AMONGST THE DIGITAL GENERATIONS (45 YO AND BELOW) ARE ENORMOUS
THERE IS OPPORTUNITY TO CREATE MARKET SHARE
THERE IS OPPORTUNITY IN RELATION TO CURRENT MARKET SHARE
THE TRADITIONAL INSURANCE INDUSTRY WILL TAKE YEARS TO DECADES TO CATCH UP
TYPES OF LIFE INSURANCEStandard life insurance, Term Life Insurance provides coverage for a specified term of years for a specified premium.
There is no accumulated cash value and therefore no surrender value.
If the policy holder dies before the term is up they receive the death benefit, but nothing if they die past the term.
Also called Wholesale Life Insurance and Institutional Life Insurance.
Usually this is coverage for employees of a company, members of a union or association, or members of a pension fund.
Individual proof of insurability is usually not required.
Benefits can be paid either as a lump sum or as an annuity.
TERM LIFE INSURANCE
GROUP LIFE INSURANCE
This offers both death benefit as well as a cash value component and lasts the policy holder’s lifetime. There are many different types.
Whole Life Insurance usually provides a level premium for the whole life of the policy holder.
Advantages are:
• Guaranteed death benefits;• Guaranteed cash values;• Fixed premiums;• Further charges do not reduce the cash value of the policy. The main disadvantages are:• the premium can be significantly higher than that for Term Life Insurance;• the premium is inflexible.
PERMANENT AND WHOLE LIFE COVERAGE
18.
19.
49
Long Term Care Insurance is a form of Whole Life Insurance where upon inability to perform Activities of Daily Living, the policy holder starts to receive regular payments.
Universal Life Insurance includes a cash account. Premiums and interest earnt on the cash account increases the cash account balance. Insurance charges reduce the cash account balance, but are usually lower than the interest earnt. The surrender value of the policy is the balance of the cash account less surrender charges. Under certain circumstances, this approach can result in lower premiums over time. Usually provides multiple rider options, including death benefit, critical illness, chronic illness, long term care and disability riders.
Variable Life Insurance is a policy where the face value fluctuates depending on the value of an underlying asset, which can be a currency, equities or another security.
Tied to an equity portfolio, Equity Indexed Life Insurance policies can provide cash value accumulation, guaranteed minimum returns, and protection against market downturns.
LTC INSURANCE
UNIVERSAL LIFE COVERAGE
VARIABLE LIFE INSURANCE
EQUITY INDEXED LIFE INSURANCE
Is where the policy holder purchases the policy in one lump sum. There are often tax deduction disadvantages with this.
SINGLE PREMIUM POLICY
Usually for ages 45+ this provides guaranteed acceptance, but often only pays out for accidental death in the first 2-3 years.
GUARANTEED ISSUE LIFE INSURANCE
Often where only health questions are asked and the applicant does not need to undergo a medical exam.
Endowments are the most expensive option. Benefits are paid whether the policy holder is alive or dead at a given age.
In this policy there is more than one person that is covered and is designed to pay out when the first person passes away. Typically cost less than getting two separate life insurance policies.
This is a limited type of life insurance that only pay out when death is caused by a defined accident. As such the premiums tend to be a lot lower than for other types of cover.
A smaller policy, usually taken later in life, and designed to meet the costs of a funeral so as not to burden the policy holder’s relatives.
SIMPLIFIED ISSUE AND NO-EXAM LIFE INSURANCE
ENDOWMENTS
SURVIVORSHIP LIFE INSURANCE
ACCIDENTAL DEATH
FUNERAL INSURANCE
A mutual fund and a term insurance plan combined into one. Resulting benefits can be tied to market performance.
Returns the premiums paid for coverage if the insured party survives the policy’s term or a portion of the premiums paid as a death benefit.
Still popular in Europe, Tontines are one of the oldest investment structures. Tontines are unit trusts where as members pass away, their portion passes tothe remaining unit holders.
Unlike group cover, where cover is still held in the individual’s name, Corporate Owned Life Insurance is owned by the company, with benefits paid either to the company or the relatives of the insured. Often taken to prevent financial loss through the loss of key personnel.
UNIT-LINKED INSURANCE PLANS
RETURN OF PREMIUM LIFE INSURANCE
TONTINES
CORPORATE-OWNED LIFE INSURANCE
50
THE INSURANCE VALUE CHAIN
Product development
Sales
Marketing Servicing Complaints
ClaimsUnderwriting & pricing
INSURANCE TERMS
Reinsurance is insurance for insurance companies. Reinsurance is used to cover different risks for insurers. For example, it can be used to cover large claims related to natural disasters or for years when claims are higher than a certain value.
An insurer who transfers all or part of a risk to a reinsurer.
Actuaries use mathematics and statistics to evaluate the risk of something happening, how much it costs to finance that risk, and how much a premium should cost. Actuaries assist insurance companies with designing insurance cover, and advise them on the level of financial reserves needed to meet claims.
Also known as a loss adjuster. In a traditional insurance company an assessor approves claims by checking for validity and meeting the terms of a policy. The assessor may choose to ask further questions or conduct interviews before approving a claim.
The BAO in contrast will endeavour to make as many claims as possible automated by using publicly available information to validate and approve claims.
Risk has various meanings in insurance, including:
• The likelihood of something happening that might cause injury or financial loss.• Exposure to a specific threat, hazard or peril.• The subject matter of an active insurance policy (risk in force).• Uncertainty as to the outcome of an event.
REINSURANCE
CEDANT
ACTUARY
ASSESSOR
RISK
May jurisdictions require insurance products to have cooling off periods during which a policy holder can cancel their policy and receive a refund.
COOLING OFF PERIOD
Underwriting is the method by which an insurance company works out how much risk exposure it has and then calculates the premiums it will need to charge to insure that risk.
UNDERWRITING
20.
51
An authority given by an insurer to an intermediary to enter into, as agent for the insurer, contracts of insurance on behalf of the insurer.
Conditions precedent to policy and liability are conditions that must be fulfilled prior to claims being accepted, or a policy to be valid.
Conditions subsequent to policy are conditions which must be fulfilled for a policy to continue, such as paying the premium.
Often part of double indemnity, or even triple indemnity, a rider is a supplemental policy to the main policy which pays out under certain circumstances, such as accidental death.
The legal rule by which real ambiguity in a policy is held against the insurer.
The portion of premium that corresponds to actual elapsed time on risk and can be taken up in the accounts. Methods for calculation include 365ths system, eighths system and 24ths system. The 365ths system is the most accurate as it is strict pro-rata.
The issuance of a policy by one insurer on behalf of a second insurer when the second insurer is not able to provide insurance in a given jurisdiction. The second insurer then provides 100% reinsurance to the first insurer.
BINDER
CONDITIONS PRECEDENT AND SUBSEQUENT
RIDER
CONTRA PROFERENTUM RULE
EARNED PREMIUM
FRONTING ARRANGEMENT
1. Community Rating: where a jurisdiction does not allow the insurer to vary the price on the grounds of risk, most commonly seen in health insurance.
2. Restricted Rating: where a jurisdiction allows insurers to vary the price, with restrictions to ensure premiums stay within an affordable band.
3. Unrestricted Rating:
• a. Group Level: where insurers have the same price for like members of a group. Commonly seen in motor, life and home insurance.
• b. Individual Rating: where the insurer has access to enough relevant individual information to enable it to price specifically for that individual.
LEVELS OF INSURANCE PRICING FREEDOM 27
INSURED BUT NOT REPORTED, ie losses that have happened but not yet reported as claims.
A condition which does not appear in a contract but is generally read in. The duty of utmost good faith is an implied term in all contracts of insurance.
The power given to courts to hear particular matters. May refer to the courts of a country or their underlying states. Is also taken to mean a distinct legal and regulatory area that an insurance company will deal in.
IBNR
IMPLIED CONDITION
JURISDICTION
A line is the amount an insurer retains on a risk under a proportional treaty. It is also used to refer to the amount a reinsurer will accept on a piece of business.
LINE
52
The price per unit, for example $3 per $100 of sum insured.
An insurer will set aside funds from its profits to meet known or anticipated claims in the future.
The total premiums on all policies written by an insurer during a specified period of time, regardless of what proportion has been earned.
Where coverage has been purchased beyond needs. Also describes a situation where so much insurance has been obtained it constitutes a moral hazard.
The portion of the premium needed to pay claims.
In certain jurisdictions, legislation requires minimum standards of cover for certain areas of insurance.
RATE
RESERVES
WRITTEN PREMIUMS
OVER INSURED
PURE RISK PREMIUM
PRESCRIBED CONTRACT
ABOUT THIS WHITE PAPER
21.
53
No person is authorised to provide information to any person, or to make a representation in connection with BAO or BAOcoins that is not contained in this White Paper. Any information or representation in connection with BAO or BAOcoins that is not contained in this White Paper may not be relied upon as having been authorised by BAO.
This White Paper contains forward looking statements which are identified by words such as “may”, “could”, “anticipates”, “believes”, “estimates”, “expects”, “intends”, “plans” and other similar words that involve risks and uncertainties. These forward looking statements are subject to various factors that could cause future results to differ materially from those expressed or anticipated in these statements. BAO undertakes no obligation to update or revise forward looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this White Paper.
Purchase of BAOcoins involves a high level of risk and is not suitable for purchasers who are unable to sustain the loss of all or part of the funds used to purchase BAOcoins, or who require predictable levels of return or liquidity.
BAO undertakes no obligation to list the BAOcoin on any exchange within any given timeframe.
Potential purchasers of BAOcoins should assess their own appetite for the risks involved independently and consult their own advisors before making a decision to purchase BAOcoins.
No representation or warranty, express or implied, is or will be made in relation to, and no responsibility or liability (whether for negligence, under statute or otherwise) is or will be accepted by BAO or by any of its officers, directors, shareholders, partners, employees or advisers (as relevant) as to, or in relation to, the accuracy or completeness of the information, statements, opinions or matters (express or implied) arising out of, contained in or derived from this White Paper or any omission from this White Paper or of any other written or oral information or opinions provided now or in the future to any interested party or its advisers.
In particular, no representation or warranty is given as to the achievement or reasonableness of any plans, future projections, prospects or financial returns and nothing in this White Paper is or should be relied upon as a promise or representation as to the future.
BAO expressly disclaims all liability for any loss or damage of whatsoever kind (whether foreseeable or not) which may arise from any person acting on any information and opinions relating to BAO contained in this White Paper or any information which is made available by other means, notwithstanding any negligence, default or lack of care.In providing this White Paper BAO undertakes no obligation to provide any additional information.
BAOcoin is not currently offered to citizens, residents or entities of the United States, Canada or Australia. This may change during the course of the Token Launch.
Purchasers of BAOcoin are encouraged to seek professional opinion on whether or not to purchase BAOcoins.
This White Paper is neither a prospectus nor a disclosure document, nor is it required to be, as purchasers are purchasing a product and not investing in a company.
A copy of this White Paper is not required to be, and has not been, lodged with any regulatory authorities.
To purchase BAOcoins, a purchaser must provide the necessary Know Your Client (KYC) information to allow BAO to comply with relevant AML (anti-money laundering) and CTF (counter-terrorism financing) legislation.
This White Paper is not purchase advice and does not take into account the situation of any person who receives or reads it. This White Paper is not a recommendation to purchase BAOcoins. It is important that anyone reading this White Paper is aware of and considers the risks associated with cryptocurrencies in light of their personal circumstances (including financial and taxation aspects) and seek professional advice before deciding whether to purchase BAOcoins.
This White Paper does not constitute an offer or invitation in relation to any place in which, or to any person to whom, it would not be lawful to make such an offer.
Apart from being the arranger of the sale of BAOcoins, BAO takes no responsibility for the contents of this White Paper. To the maximum extent permitted by any applicable law, BAO expressly disclaims and takes no responsibility for any part of this White Paper. BAO does not guarantee the future value of the BAOcoin or the performance of related entities or transactions. BAO does not guarantee the return of any funds received from the sale of BAOcoins.
IMPORTANT INFORMATION
OFFER OF BAOCOINS
NO ADVICE
REPRESENTATIONS
FORWARD LOOKING STATEMENTS
PURCHASE RISK WARNING
BAO means the companies operating the BAO Token Launch as varied from time to time.
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REFERENCES1 http://www.xprimm.com/Global-insurance-industry-EUR-3-6-trillion-in-2016-up-4-4-y-o-y-articol-117,149-9184.htm
2 https://www.iii.org/fact-statistic/facts-statistics-industry-overview
3 https://en.wikipedia.org/wiki/Code_of_Hammurabi
4 Actuaries Institute of Australia November 2016. “The Impact of Big Data on the Future of Insurance”
5 LIMRA 2015, “Insurance Barometer Study”
6 http://www.insurancefraud.org/statistics.htm
7 Ian R Blakesley and Anca C Yallop 2015. “Consumer perceptions about digital privacy and online data sharing in
the UK insurance sector”
8 http://www.swissre.com/library/publication-sigma/sigma_3_2017_en.html
9 FINMA Insurance Market Report 2016
10 http://www.ruralfinanceandinvestment.org/node/461
11 Actuaries Institute of Australia November 2016. “The Impact of Big Data on the Future of Insurance”
12 AON 2017. “Global Insurance Market Opportunities”
13 FINMA Insurance Market Report 2016
14 Actuaries Institute of Australia November 2016. “The Impact of Big Data on the Future of Insurance”
15 World Economic Forum, “The Future of Financial Services” Report, June 2015
16 PwC 2012. “Life insurance 2020: Competing for a future”
17 http://www.jdpower.com/press-releases/jd-power-2016-us-life-insurance-study
18 https://insur-tech.com/listing-category/startups/
19 Haber, Stuart; Stornetta, W. Scott (January 1991). “How to time-stamp a digital document”. Journal of Cryptology.
20 Nakamoto, S. 31 October 2008. “Bitcoin: A Peer-to-Peer Electronic Cash System”. Also known as
the Bitcoin whitepaper, http://nakamotoinstitute.org/bitcoin/, http://bitcoin.org/bitcoin.pdf
21 https://github.com/ethereum/wiki/wiki/White-Paper
22 https://www.coinschedule.com/stats.html?year=2017
23 https://www.coinschedule.com/stats.html?year=2016
24 https://www.japantimes.co.jp/news/2018/01/23/business/japan-global-leader-cryptocurrency-investment/#.
Wrejd2puY-U
25 https://www.investinblockchain.com/cryptocurrency-trends-2018/
26 Actuaries Institute of Australia November 2016. “The Impact of Big Data on the Future of Insurance”
22.
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