Call it double disruption. Real time claim to cash using blockchain could disrupt Insurance. That is disruption number one. ICOs could replace large parts of the traditional innovation capital business – early stage VC and IPOs. That is disruption number two.
That makes Aigang an interesting concept to study. The fact that it is only concept – not a product, let alone a profitable business – is part of the second disruption story.
Tigger is all excited about how all this innovation will create a better world. Eeyore says this will all end in tears. ICO speculators shovel in cash to make a quick buck while retweeting Tigger. Eeyore sits on the sidelines waiting to be able to say “I told you so” and buy later for pennies on the dollar.
Who is right here?
To help initiate a conversation, this post looks at the:
- Concept
- Technology
- Team
- Jurisdiction
- The deal for “investors”
The concept – real time claim to cash for small claims
Conceptually this makes sense. This post explains why claim to cash time is so critical and why blockchain based smart contracts is the enabler. The post was written in May 2016 and Aigang was formed in 2017 so they may have read it or simply tuned into the same innovation radio waves. This bit explains the basics:
“Auto Payout Based on a Trustless Smart Contract
This holds out a win/win promise. Customers know that payout is automatic and immediate (no more hassling for payout during the most stressful times when the bad event has actually happened). Insurance companies get two benefits:
Elimination of fraud. The Insurance company does not rely on the customer’s version of truth. There is independently verified data.
Elimination of claims processing cost. This is a consequence of elimination of fraud.
For this to work, it has to be binary simplicity. An algo has to make a yes/no decision instantly. Something with complexity (such as who is at fault in an accident or whether a medical procedure is covered) needs human intervention.
One example of where we see that binary result is flight insurance. The flight was either cancelled or it was not. Blockchain systems use external data sources (e.g via the Oraclize service ) to get this proof of what happened. A Proof Of Concept for this flight insurance use case was coded during a weekend at a hackathon using Ethereum – proving that technical risk is not the prime concern.
We expect to see lots of use cases where this binary rule applies where really low cost insurance can be offered (thanks to elimination of fraud and claims processing). This is classic disruption at the edge – where disruption usually gets traction. For example, there are lots of use cases within the sharing economy. These are on demand or just-in-time insurance use cases.”
Aigang is going after a sensible early market in the “really low cost insurance” segment – mobile phone batteries. It is small enough to enable real time settlement and” human real time” (less than a few seconds) changes user behaviour.
It looks like Aigang can get the battery data automatically from your mobile device. Yes this is also an IOT play. Eeyore was heard muttering about random buzzword generators – ICO, Blockchain, IOT, Insurtech, but Tigger responded by saying that the concept makes sense.
The investors will be P2P. The crowd will be the new Lloyds Names. Hmm, how does that fit with Solvency 2? Will the crowd take unlimited liability like Lloyds Names? This can only work outside the regulatory framework.
The technology
Ethereum – brilliant plaform, still with bleeding edge risk. As Aigang put it:
“Built on Ethereum testnet, the application is not fully functional yet, and there are chances that the users attempting to send funds from their Ethereum wallet could lose their funds.”
On the plus side, they do have a fairly active GitHub as per Token Market.
What is your risk appetite? This has technology risk at the platform level and at the application level. If you don’t really understand Ethereum or trust somebody who does, this is not for you.
The team
They look good on pixel. But they have not got a product in the market, so that is all one can say. One assumes they are all getting paid in equity and tokens. If the ICO succeeds they will become a real team.
They also offer “bounties” to contributors. No, I did not ask for or want a bounty for writing this post. This is like 1999 when landlords would take equity for rent.
The jurisdiction
Singapore. One assumes Aigang will block IP addresses from America and make big bold signs saying “no Americans please” in order to stay out of SEC clutches.
This is far outside the regulated world. This is not a sandbox experiment. Aigang plan to offer a product outside the regulated world. This post by a VC in 2014 explains why this strategy makes sense drawing on lessons from Skype.
The deal
This is not being revealed yet. In ye olde innovation capital game, a concept stage venture with MVP still in development like Aigamg would raise $50k to $500k. $50k would be for a first time entrepreneur. $500k would a proven entrepreneur wired to top Angels and VCs. Two years later, 10% of these would do a $5m Series A and a year later about 50% during loose money times would do a a $50m Series B. Aigang will probably raise $50m out of the gate.
Will it be a great deal for token investors? I doubt it. Maybe for equity investors who have a lot of appetite for risk and if the price is right.
Will it change the world and unleash a new wave of Insurance claim to cash innovation using Blockchain? I think so.
Bernard Lunn is a Fintech deal-maker, investor, author and thought-leader.
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