Another crash in the global crypto market will increase interest in insurance products for crypto wallets, and GlobalData figures suggest there is already a market for it. However, the second major crypto crash of 2024 emphasises the level of risk that insuring against significant investment losses would be to insurers.
According to a 2024 GlobalData poll run on Verdict Media sites, 44% of respondents said they would be interested in an insurance product for cryptocurrency wallets. Out of the five options given, this was second only to personal cyber insurance (61.3%). This, of course, covers a range of threats to cryptocurrencies. The primary risk that insurers may be prepared to cover would be digital theft or any form of the digital wallet being compromised by hackers or fraudsters. This would essentially be a niche form of cyber insurance and is certainly a market we expect to grow.
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Consumers are also likely to seek protection against severe market crashes, such as those that occurred in both May and, more recently, August 2024. The total value of cryptocurrencies fell by 13.1% (according to Forbes) in a 24-hour period in August, with Bitcoin and Ethereum particularly impacted. The crypto market is especially volatile—much more so than traditional stocks and shares. This means that while people can and have made large profits, they can see large parts of their investments—and sometimes even all of them—wiped out in a short space of time. This therefore makes some level of protection against this an appealing proposition for consumers.
The risk for insurers is likely to be too high in the immediate term at least. It could be a viable area for insurers if the market does become less volatile in the years ahead—though it would then be less appealing for consumers. In the meantime, this product is unlikely to develop, or would only be picked up by niche crypto specialists who would charge high premiums.
For now, the innovation within crypto and insurance is likely to be more focused around protected digital assets within crypto wallets. This will be a more approachable market for insurers to enter, though we still expect it will be dominated by insurtechs and crypto specialists.
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