Bitcoin insurance policy endorsement
Investors no longer need to worry that investments in, or profit made from, bitcoin is illegal, or worry about how to report them to the IRS. Bitcoin and virtual currencies can have positive impacts when it comes to insurance. They create a new class of asset to insure, and the value of premium payments may rise before they are converted to dollars. The negative impacts, however, occur when your insured has a gap in coverage for loss of bitcoin with current policy forms.
Plus, the value of premium payments may fall before they are converted to dollars. In light of the IRS ruling, accepting bitcoin as a method of payment is the same as accepting other non-currency items, such as publicly traded stock certificates, gold or silver. Bitcoin theft is not covered under a homeowners or a business policy without special endorsements. In the wake of large documented thefts of bitcoin, customers should consider insuring against this risk.
The insurance industry has responded to virtual currencies very slowly. Teambrella , a new peer-to-peer British insurance company, is currently launching with the goal of becoming the first decentralized bitcoin-based insurance company.
Ensure you and staff are aware of the basic bitcoin concepts and applications, and review your current customer base for possible impacts.
If you have commercial clients using bitcoin, be sure to investigate a niche market for insuring bitcoin and other virtual currencies which are not yet a mature technology. Duke Williams is founder of Simply Easier Payments, an electronic payment gateway, and EchoSage, a digital expert assistant. View the entire Changing Nature of Risk advisory series online.
Although InsurTech was once believed to be a threat to independent agencies, many agency owners now realize they can use technology to get ahead in a competitive market. As a subset of alternative and digital currency, a virtual currency is a medium of exchange that uses cryptography to secure transactions and control the creation of additional currency units. Bitcoin is the most well-known virtual currency. Virtual currencies use decentralized control—as opposed to centralized control, as in banking—which causes central banks of various countries lose control and regulation.
This loss of control puts these currencies at odds with nation and state monetary control policies and practices. For businesses that accept bitcoin or other virtual currencies as payments, or hold them as investments, the impact could be extreme. One benefit of this ruling is that it clarifies the legality of bitcoin. Investors no longer need to worry that investments in, or profit made from, bitcoin is illegal, or worry about how to report them to the IRS.
Bitcoin and virtual currencies can have positive impacts when it comes to insurance. They create a new class of asset to insure, and the value of premium payments may rise before they are converted to dollars. The negative impacts, however, occur when your insured has a gap in coverage for loss of bitcoin with current policy forms. Plus, the value of premium payments may fall before they are converted to dollars.
In light of the IRS ruling, accepting bitcoin as a method of payment is the same as accepting other non-currency items, such as publicly traded stock certificates, gold or silver. Bitcoin theft is not covered under a homeowners or a business policy without special endorsements.
In the wake of large documented thefts of bitcoin, customers should consider insuring against this risk. The insurance industry has responded to virtual currencies very slowly.