The sharing economy has spawned a number of success stories — from Airbnb to TaskRabbit and Lyft to Lending Club.
But what about sharing risk, instead of tangible goods and services?
Rega — a “crowdsurance” platform that uses blockchain technology to share risk across the community — today announced that it is entering the travel insurance market.
The problem Rega is trying to solve is fairly simple. Right now, insurance companies own in-house algorithms that measure risk assessment, and consumers pay premium prices to help with the cost of replacement, repair, or assistance in the event that something goes wrong.
Rega wants to decentralize the global insurance market, an industry that is currently worth around $5 trillion.
Having tested the waters with a pet insurance product, Rega is now entering the travel market with luggage insurance.
So how does it work?
Rega has developed its risk-sharing platform — built on Ethereum — so that people in the community can unite in groups to protect each other.
So how does this coverage help with the practicalities of lost or damaged luggage? Quite often, people waiting for lost bags need to buy clothes and toiletries to tide them over until the original item arrives (of it ever does).
“The insured must provide us with their boarding pass, air tickets, and confirmation from the air carrier that their luggage has been lost,” CEO and founder Sergei Sevriugin told me. “We then do verification with the air carrier and make payment.”
That sounds simple enough, and Rega has two tiers available right now.
“One offers an immediate payment of $/€ 200-300, and a surplus payment if the luggage is not found after one or two weeks, with coverage from $/€ 1000-5000,” Sevriugin said. “The second is a more simple product, where we use the same scale of coverage if the luggage is not found after 1 or 2 weeks. However, clients do not receive the immediate payment of $/€ 200-300. The customer may take this option if he/she is receiving insurance from their air carrier or their credit card program, for example.”
Rega is taking quite a pragmatic view when it comes to the initial payments and the full cover.
“In both circumstances, if the client retrieves their luggage from the air carriers after Rega has provided compensation, they can keep the money and their luggage,” Sevriugin said. “We know that in most cases, luggage retrieval is about 2-3 days, so if there is no luggage after one week, there is only a small chance that the air carrier will find it. Moreover, we believe that it will be too difficult to ask for payment back. Even if luggage is found after one or two weeks, we do not want to spend our resources on this.”
Does this affect the airline’s obligations, or reduce them in any way?
“We do not plan to reduce insurance coverage for the sum of compensation from the air carrier or a credit card insurance program,” Sevriugin said. “And we do not think that air carriers could wash their hands [of responsibility] if they knew that our potential clients were insured with third-party insurance.”
Rega — which is based in the British Virgin Islands — launched its first project, Lexi Club, in March 2017. The pet crowdsurance network — designed to manage the risk of injuries or sudden illnesses in pets — proved that the model was feasibile.
Rega’s new luggage insurance solution provides cover for up to $5,000 and is expected to cost around $12 per year.