Brokers, who needs middleman insurers anyway?

Published: July 18, 2018



When looking to other markets to emulate, it is perhaps a surprise to see Canadian brokers look to Estonia. However, the small European country has been innovating with its brokerages using a blockchain distribution model. So often we hear how insurance companies will eventually cut out brokers, but there is a potential that brokers will no longer need carriers.

Black Insurance is an Estonian company that is embracing this concept and this week the company spoke to Canadian Underwriter. Mart Parve, CEO of Black Insurance, says the idea of an intermediary could change. In most cases, people think of an intermediary as a broker or agent, but what if the insurance company is actually the middleman?

“When giving it a little bit more thought, the insurers might be viewed as intermediaries between capital and the brokers. In this regard, we think insurers are just as much intermediaries as brokers.

“Indeed, when we speak about ‘cutting out the middleman,’ the automatic assumption is that the middleman who should be cut out is the broker. But we are thinking that it’s possible to cut out the insurers from between brokers and capital. That’s the larger fundamental premise behind our business model.”

Looking at this model, the obvious question is where does the actual insurance come from… who is the underwriter?

Parve says this is covered by a syndicate. For example, “A group of underwriters from London might come together and decide, ‘Look, we want to underwrite agricultural policies in Africa,’ and so they create a syndicate that we will do agriculture in Africa. They will put in their own money, institutional money, and then create a coin offering for investors interested in funding that line of business. The capital in the syndicate would be represented by the investors’ security tokens.”

“And so there would be a partnership borne between syndicates on the one hand and the brokers with the product on the other hand,” Parve says.