Tontine Trust: Could a Centuries-Old Insurance Model Make a Blockchain Comeback?
Taiki Asakawa is an actuary at Tontine Trust, a blockchain-based insurance and retirement investment platform. The former insurance company employee says he sees huge issues with the current insurance industry, where money is not managed effectively and a large amount is wasted by companies — causing subscribers to get paid much less than they could.
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The Tontine Model and How it Works
Asakawa told us about his experience in the insurance industry, and how blockchain tech could help solve some of its shortcomings, like inefficiency and waste.
Tontine Trust is based on the “tontine” concept, a group co-operative insurance scheme invented more than 300 years ago. Tontines are still popular in France, and were once extremely popular in the United States. However they have since faced heavy regulations in the U.S. and no longer exist there in any formal way.
Basically, tontine is a system whereby money is invested by, and distributed to, people within a certain group. Each subscriber pays a set amount into the fund pool. As members die, the fund is distributed among the survivors.
Recently, financial experts have begun reconsidering tontines as an effective alternative for distributing pensions, e.g: for employees of a particular company. If useful, they could even replace current insurance/pension systems, which are creaking under the weight of diminished trust, increasing lifespans and lack of adequate funding.
Using blockchain technology and autonomous smart contracts, Tontine Trust hopes to provide a more efficient and secure version of the traditional tontine system, saving a lot of money for subscribers.
Problems With the Current Insurance Industry
A regular, centralized insurance company could go bankrupt, taking with it all customers’ retirement savings. While this could potentially happen to any investment plan, a lack of transparency and accusations of mismanagement at some large corporations mean people trust them far less than they used to.
Members can use the Tontine Trust platform to audit balances and get information on projected investment returns at any time. In fact it’s not even necessary for members of a group to know each other’s identity — one key advantage over traditional tontine schemes.
Tontine Trust itself is structured as a non-profit organization. Potential members buy utility/settlement currency tokens called TON$, which will be available on cryptocurrency markets. The funds are then invested in other exchange-traded funds.
Tontine Trust aims to repurchase the tokens on the open market and pay them to members monthly. It hopes this increasing scarcity will also lead to higher values, and will provide incentives for members to keep their holdings in TON$ instead of converting to fiat currency. Will it deliver, especially over the longer-term periods required to fund retirements? Will users actually keep their TON$ or be more keen to convert into fiat than project organizers hope? Will regulators actually allow it? Some have expressed doubts, and Tontine Trust will need to prove itself over a long-term period to gain investors’ trust.
All those factors present quite a gamble, given the short and volatile history of blockchain tokens and the legal hurdles they’ve faced as investments. Watch the full interview to find out more.
What do you think of Tontine Trust and its chances of success? Let us know in the comments section.
Images and video via Akane Yokoo, Bitsonline
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