Gibraltar: How DLT Can Revolutionise The DLT Space

Last Updated: 31 October 2018
Article by Jonathan Garcia

DLT use cases

Many use cases ideas have been proposed for DLT, and some experiments and feasibility studies have been carried out. With regards to the use case proposals for the insurance space, whilst not an exhaustive list, some of the key areas likely to incorporate a DLT-based approach are insurance claims management; proof of insurance; management of policies for multinational clients; post-trade settlements; insurance placement and contract lifecycle; KYC and AML compliance; and policy tracking. It is clear that the number of areas affected by the technological developments in the insurance sector is vast, and given the nascent technology underpinning DLT, it is likely that many more use cases will be suggested over the coming months and years.

Early-market Adopters

InsurTech enthusiasts are finding new ways to penetrate existing target markets by incorporating new technologies into their business model frameworks. Hedgehog, a new online motor insurance provider targeting drivers who face higher than average premiums have reported of developing a footprint in Gibraltar. Capacity for the managing general agent (MGA) is being provided by Berkshire Hathaway International Insurance. Hedgehog was founded by CEO Pete Storey and business partner Ben Gower, who together also own direct travel insurance MGA 1Cover.

According to its website, Hedgehog uses intelligent, automated underwriting and data analysis to drive advanced risk pricing and fraud prevention, powered by its own cloud-based software platform Engage. It is targeting 50,000 customers in the first year in the 21 to mid-40s range that face higher than average premiums for reasons such as holding points on their licence, a driving conviction, or being blacklisted by certain insurers because of their postcode.

CEO Pete Storey commented that:

"Having our own technology platform gives us complete control and flexibility to ensure we can provide sophisticated policy optimisation for individual customersandmakefulluseofadditional data sources such as My Licence. It also means we have the complete dedication and attention of our software provider – not something many insurance providers can boast,"

Why obtain a DLT Licence?

Obtaining a DLT licence in Gibraltar poses several benefits for the business which outweigh the level of regulatory compliance which it imposes. Here are some of the reasons why acquiring a DLT licence could be favourable for a DLT business:

1. Legal Certainty

A DLT licence provides clear regulatory rules and provisions which are required to be complied with when conducting one's business. This creates sufficient legal certainty for businesses who know well in advance, what it explicitly can and cannot do. This in turn will save costs for businesses and investors alike, who do not carry the worry of uncertainty on whether or not certain practices were unlawful.

2. Consumer Confidence and Trust

Regulation is one of the pillars necessary to instill consumer confidence and trust in the specified market. Having a DLT licence ensures the consumer that appropriate regulatory criteria's have been met, which should increase the credibility of that business.

3. Higher Standards of Consumer Protection

Ensuring a business obtains a DLTlicence guarantees the business' consumers a certain level of surety over and above non-regulated entities that are not subjected to regulatory requirements such as adequate or minimum levels of capital adequacy to settle claims or the proper safeguarding of customer assets.

4. Maintaining and Protecting the Market's Integrity

Of critical importance, the DLT Framework provides appropriate and adequate safeguards for consumers, ensuring that financial crime risks are mitigated by the business through KYC and AML checks, at the same time protecting the reputation and integrity, of the jurisdiction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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