You’re watching Business Daily, TV Evropa and Radio Evropa’s economical show. Our first guest today, Feb 4th, is Kalojan Georgiev, co-founder of Colibra. Good afternoon and welcome! Thank you for the invitation. We’re happy to have you here. You have an interesting background: from the pharmaceutical industry to your current business in FinTech. Or perhaps technology, or finance? Let’s start with introducing your company Colibra in a few words. Colibra is an insurance company. It addresses a specific problem in insurance, namely the lack of trust. Studies conducted by IBM, PwC and others have shown that about two thirds of consumers have no trust in insurance companies. There is a good reason for that. A year and a half ago, a few friends and I decided to address this problem. We needed more than a year to find the right form and way to do that. As of this moment, I can say we have found the solution. Our company is registered, we’re waiting for our license and we’re planning to start doing business in 2019. We discussed this before we went on air, but insurance is a very conservative industry. What kind of solution do you envision and how do you know the market would embrace it? It really is an extremely conservative sector. However, there is no industry that’s too conservative to enter if you’re using the right approach. I have plenty of experience in pharma distribution. We sell pharmaceuticals all around the world. When we started about 12 years ago, they told me the same thing: too conservative as a sector, no way to enter. Maybe even a little more conservative than insurance, in fact. Absolutely. Insurance is a very old-fashioned business, so aside from having a very interesting long-term product, we have created a short-term entry product as well. It will help us penetrate the market initially. Let’s describe the idea behind: Redefining the insurance industry. Is this what you’re trying to do? Yes, we can say that. It’s an ambitious goal, surely. We’re also trying to pioneer a new business model in insurance which aims to democratize and decentralize the decision making process. Why do consumers distrust insurers? The main reason is the deeply incorporated conflict of interest in claim handling. When you’re buying a policy, your insurer is happy to take your money. But when the insurer has to pay you back on a claim, this is considered “loss”. This is how claim payouts are described in bookkeeping and nobody likes to lose money. Often, when you most need your insurance company to be your friend, it can be your biggest enemy. We know what fineprint is used for. Paying you would mean smaller profits for the insurer? Yes, absolutely. What kind of solution do you have in mind to put both customers and insurance companies on level ground? People have been looking for an answer to this question for years. The solution that we currently use on the market is called a broker. Brokers are an interesting phenomenon, as they pretty much control the market. Everyone knows that. We trust our broker to tell us where to buy insurance. Think about the reason why? The reason is not that you can’t visit the insurer’s offices yourself – they’re all around us. The thing is that if there’s an accident and you are directly insured with the insurance company, there is a considerable risk of not being compensated. Or at least not getting the compensation you expect? Insurers follow their own interest. If they choose to pay you, so they maintain their good reputation, they will do it. But if their financial year is not going well, they might choose otherwise. True. When you use a broker, however, there is a sort of independent side between you and the insurer. A mediator. Exactly. Brokers work with a number of insurers, not just one specific company. They also work with many clients. A client can count that whenever they have a problem, the broker will tell them how to approach the claim and will protect their interest. You know you can trust the broker, as you’re paying them to help you. Whereas, if you go directly to the insurer, things happen differently. The broker is who customers trust. On the other hand, the insurer also trusts the broker. Brokers want to maintain good relationships with their insurer partners as well. This makes the broker a mediator who helps with making decisions. However, this is a very old approach. What Colibra is trying to do is something similar in its effect, but based on new technology. Modern technology already allows this process to be much more efficient. What do I mean by more efficient? Brokers often increase the insurance premium by 30-50%. This means that the price we pay nearly doubles, just for using a broker. Just for having a mediator. What if we addressed this using technology? When you mentioned decentralization, the first thing that came to my mind was blockchain. Yes, we use blockchain, but only as a technology. Let me make things clear here. Many people think the blockchain and cryptocurrencies are one and the same thing. Yes. Blockchain is a technology that stretches far beyond digital currencies like Bitcoin. Colibra is not an alternative to Bitcoin, we are not a currency. We use blockchain as a technology to create records that can’t be manipulated. The main idea behind blockchain is transparency. We cannot guarantee transparency if everything is recorded on one of our servers. Cause I can manipulate it. Every company can manipulate their own servers, even if they’re open source. Once on the blockchain, however, records cannot be modified in any way. We are therefore not a new currency, just wanted to explain. But we just use the technology behind to ensure our transparency. Let’s go back to this eternal conflict between clients and insurers you mentioned. Correct me if I’m using the word “conflict” wrong here. You say you’re standing in the middle. How will Colibra benefit both customers and insurers? We’re not standing in the middle, in fact. We are a fully licenced insurance company that wants to prove that this new transparent model works. Once we do that, we will be open to working with other insurers as a platform. But we’re starting out as our own insurance company. We’re incorporated in Malta and we’re waiting for our insurance license. We are not a mediator in the full sense. We have a solution that will make the whole process independent from us. As an insurer, we will be in the position to manipulate results. The way we’ve avoided that is by using a popular new approach, called “crowd wisdom”. We trust the crowd to decide. We educate people. We do that the way Uber does it. Yes. You probably know how Uber works. We train claim handlers across the world, much like a standard insurance training, followed by an exam. The exam scores are written on the blockchain, to prevent manipulation. This means different handlers can perform different tasks, based on a public protocol. In other words, there are rules to follow, but claim handlers are not under our control. The technology that allows this is namely blockchain. The way it works is as follows. Let’s say you’re traveling abroad and and some sort of accident happens. You take your phone, run the app and file a claim. This is something many insurers are trying to offer. What happens next? Traditional insurers use their own employees to make payout decisions. Employees, of course, get paid by the insurance company. The decisions they make are based on orders from above – sometimes transparent, sometimes not so much. Not as objective? The way Colibra makes financial decisions is different. An algorithm redirects premium money in two directions. Part of it goes to Colibra’s reserves which allow us to stay solvent. This is where claim payouts come from. But another part in converted into tokens. This is not a currency, as we mentioned. Those tokens go into a so called “wallet”. This wallet can’t be manipulated, designed in a way that we can’t decide to just withdraw the money. The way decisions are made at Colibra is this: The random handlers across the internet make their decisions. They make phone calls, check data, much like insurance employees would do. The moment they make a decision through the app, it’s recorded directly on the blockchain. It’s transparent how many independent users have worked on the claim and what their decision has been. When they decide a payout has to be made, this is written on the blockchain. And it can’t be manipulated. Next, a piece of code triggers a payment toward the client or the institution in the form of tokens. Directly. Colibra as the insurer has no control over that whole process. The payment is direct. Of course, this is just a simplification of how the platform works. Of course. The payment is made in tokens. The client or the institution, naturally, would rather have their money in a fiat currency. Of course. Dollars for example. The way we guarantee this is by keeping our mandatory actuarial reserves in regular money, in a regular bank account. As soon as you receive 1000 tokens in your wallet… Yes You have the option to keep the tokens, but in most cases you will need this money – equivalent to 1000 EUR, for example – to pay your expenses. In those cases you have the option to press a button in the app and those 1000 tokens are immediately converted into 1000 EUR. How does this happen? Those tokens are, in essence, a method of payment. Think of them as a cheque. As soon as you click the convert button, you’re sending the bank an encrypted payment order. The bank keeps Colibra’s actuarial reserve in fiat money. Once it receives this payment order… It triggers the payment? Exactly. It debits the bank account with those 1000 EUR and transfers them to you. The cheque itself disappears, the way a normal cheque is destroyed. This makes our tokens an encrypted, secure payment cheque. Then comes the second part of the process that concerns the claim handlers that have performed certain tasks and expect their respective rewards. To keep them independent, they get paid using that same wallet and not by Colibra. Another line of code makes this possible. As soon as they’ve done their job, they receive a certain amount of tokens themselves – let’s say 10 EUR each. Again, they can convert them or keep them in tokens. It’s a completely decentralized system in which the owner of the system does not make the final decisions. Precisely. The goal is to make this system 100% autonomous at a certain point. Of course, it won’t be easy at first, but this is our goal. Do you have competition? Is there another platform around the world that uses such a decentralized claim handling? No, there isn’t and the reason is that traditional insurance companies don’t want to give up their control so easily. They’re doing everything they can to help improve their business figures. They are working on their own apps, on improved usability and convenience for their clients. But giving away their control… Of course, this is typical of all conservative industries. Everyone knows how the current system works. Which countries and markets are you targeting? This type of technology itself is not restricted by borders. But considering our initial license, we’ve focused on Europe and a few non-European countries. Colibra’s travel insurance license allows us to sell our products in many countries although we’re practically licenced in just one of them. Penetrating travel insurance is hard, which is why we’ve decided to start with a short-term solution. In a matter of 2 weeks, we’re planning to launch a very interesting product that will help us both actively penetrate the market and gain the user base that would make expanding to travel insurance much easier. Let’s say a few words about this product. 2 weeks means you’re almost ready to launch? Definitely. What I first want to say is that here on your show is the first time that we mention anything about the product. We appreciate that. The fact that we plan to launch so soon is why we haven’t announced anything so far. Some initial information will start appearing on the internet this week. OK. Our first product is actually not an insurance product. It’s a compensatory service. It addresses the travel market, but instead of the part concerning accidents it deals with passenger flights. Your viewers probably know that there is a European directive, called the EU 261, that makes travellers eligible for compensation when their flight is delayed. I’ll explain how this happens first and then say how Colibra enters the picture. How it works now? Let’s say you’re flying to a certain airport and your flight is late. In order to be eligible for compensation, the delay must exceed 3 hours. It’s true. If the delay meets this first requirement, your next job is to find out who’s to blame for this delay. If the air carrier is responsible, you qualify for a compensation. And vice versa. But here comes the problem. No information is available. What’s more, the air carrier’s employees are well trained not to know this. It’s not in their interest! Let’s say they’ll tell you the “correct answer”. As a result, you’re often left clueless for the sake of saving the airline company some money. But even if you somehow find out the delay reason, you now have to file a claim with the air carrier. Yes. You can also hire a lawyer. Or you can contact one of the compensation assistance companies, they’re sort of legal assistants as well. Companies like AirHelp. There are many such companies. What usually follows is an email exchange with the air carrier that takes between 2 and 6 months and if all goes well, you receive your money. This is the present situation. The flight compensation market is currently worth around 8 billion EUR but less than 10% of it actually reach travelers. People only receive 700-800 million out of those 8 billion. Over 7 billion are lost. The process is long and cumbersome and many people decide not to go through it? What’s more, if the airline company declines to pay, you may have go to court. No one wants that kind of trouble for 300-400 EUR. It gets too complicated. We only have a minute to summarize the product, unfortunately. What we offer is a compensatory service, similar to current compensations, but completely unconditional. The flight can be much less than 3 hours late, it doesn’t matter who is responsible and you don’t even have to file a claim – it’s automatic with instant payouts. You just download the Colibra app and scan your boarding pass. Then you use our gamified slider to choose what delay you want to cover against and how much compensation you will receive. That’s based on the risk you want to take. The higher the risk, the more you can get. Of course. Then you just wait. Every time your flight is late, you receive a compensation. The way we do it is by doing our math. We collect all the money eligible for compensations and we distribute it among many people who got their flights delayed, no matter the delay time or the reason. But easy. This product deals with the main problem of flight compensations: difficulty. Colibra deals with air carriers, while you get your money right away. But you get your money immediately. There is no product like this on the market. Instead of waiting for 6 months and hoping to get compensated, you receive a smaller but instant and unconditional refund. We take care of the rest. This product will be ready within 2 weeks? That’s right. 2 weeks from now. Thank you, this was Kalojan Georgiev from Colibra.