Singapore-based fidentiaX is building the world’s first marketplace for tradable life insurance policies with the aim to disrupt the multi-trillion dollar life insurance market.
The fintech startup is leveraging blockchain technology to create a platform that will allow life insurance policyholders to sell their policies to third-party buyers for a potentially higher cash value than if they were to surrender their policies to their insurance providers. Buyers of the insurance policies, on the other hand, are able to purchase a stable investment vehicle with a low correlation to stocks and bonds.
Empower Life Insurance Policyholders
Currently, if a life insurance policyholder wants to voluntarily terminate their policy, they can surrender their policy to the insurance company to receive the cash value of their policy.
Alternatively, policyholders also have the option to sell their policies in the tradable life insurance market for a potentially higher cash value. However, this market is difficult to access as there is no recognized marketplace to list policies, which is why so few individuals are even aware that they have this option, let alone actively use it.
fidentiaX wants to change that. By developing a transparent and accessible marketplace that allows policyholders to sell their policies to third-party buyers, the company aims to empower life insurance policyholders by providing an alternative to the antiquated business model.
The World’s First Marketplace for Tradable Life Insurance Policies
In co-operation with Blockchain Zoo, fidentiaX is building a blockchain-powered marketplace that will tokenize existing insurance policies to turn them into easily tradable instruments in a market that brings together life insurance policyholders, investment managers, and private individuals who want to gain access to this alternative asset class.
The marketplace will be a membership-based ecosystem that will come with the following features: a policy ledger, a listing of tokenized life insurance policies, a marketplace for the purchase of tradable policies, a custodian service, and a portfolio builder service.
The policy ledger is there to alleviate the reliance on intermediaries by creating a digital ledger where policyholders can store an immutable digitized record of their policies that includes premium payments alerts and their coverage summary. The policy ledger will also come with multi-signature access for beneficiaries and trustees in the case of a mortality event.
The listing of tokenized policies is a database of all available tradable insurance policies, which will include endowment, whole life, universal life, key-man, and investment-linked insurance, among others. A repurchase option for policyholders who want to buy back their policies within a specific timeframe will also be included as a feature in the listing database.
The member’s auction platform will be conducting periodic private sales for its members. Policies from the fidentiaX model portfolio will be put up for auction and members can bid for the policies using the fdX tokens. Successful bidders who take ownership of policies can then either cash out the policies or add them into their investment portfolios.
The marketplace for secondary policies will allow investors to actively buy and sell insurance policies. On the platform, these policies can be filtered based on different criteria such as tenure, yield-to-maturity, and amount, among others.
The fidentiaX marketplace will also provide a custodian service for insurance policy buyers so that the policies can be held in a trust structure and the payment of premiums and the realization of the cash value of the policy can be conducted in a low-hassle manner. Investors who purchase policies on the marketplace will be able to choose whether to transfer the purchased policy to their name or engage fidentiaX to hold it in a trust.
Finally, the platform will also offer a portfolio builder, which is a bespoke service for buyers who are looking to build a diversified portfolio of secondary insurance policies. The portfolio builder service will include a professional service for sourcing, validating, and transferring of policies suited to the buyer’s investment needs.
How Buyers Will Benefit From the fidentiaX Marketplace
Increasingly, fund managers, corporations and private investors are viewing insurance as an asset class that fits into their investment portfolios. However, high barriers to entry such as difficulties in sourcing for policies and the manual policy transfer process make insurance policies difficult to invest in.
Through the use of the fidentiaX marketplace, however, insurance policy buyers can reap the benefits of this alternative asset class without the current difficulties faced in this market.
Buyers of tradable life insurance policies can benefit from being able to diversify their investment portfolios with an asset class that has previously been difficult to gain access to that provides stable returns with a low correlation with traditional securities such as stocks and bonds. Furthermore, tradable life insurance policies come with a fixed tenure and when traded on the fidentiaX marketplace also liquidity.
Additionally, buyers of tradable insurance policies in the secondary market can purchase these investments at a discount to the current value while still being able to offer to policyholders a higher cash value than if they were to surrender their policies in many cases.
Tradable life insurance policies also allow buyers to smooth returns as insurance companies tend to keep undistributed revenues as a reserve, which they distribute to their funds in underperforming years to smooth out the performances of their funds. Furthermore, buyers can also receive the policy payout amount in the case of a mortality event, which could potentially be higher than the policy’s cash value.
By creating the world’s first marketplace for tradable insurance policies, fidentiaX is opening the doors for a next-generation market in life insurance policies that will empower policyholders and create new investment opportunities for policy buyers.
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