Wild west or space race? Insurance industry meets crypto world

At his previous posting at a boutique agency in Minnesota, in common with the rest of the country, “I got heavily involved in cyber risk.” But he saw how a lot of businesses “don’t understand what they are buying,” when it comes to the cyber world.

Now, he is on the inside looking out in the cyber world.

He joked that in his new role, as head of insurance for Evertas, a crypto insurance specialty underwriting MGA, surrounded by crypto experts, he’s “learning it as fast as the hamsters in the brain can pedal.” He is used to out-of-the-box thinking, but he can still feel like Alice in Wonderland at times.

In crypto, “the underwriting is very precise,” and in his new venture, a lot of meshing is taking place. The crypto and insurance worlds “don’t need to collide,” he said. “You have people that have spent the last six years of their lives doing nothing but looking at crypto native stuff. And they you’ve got a group of insurance guys. There’s a couple of us – that’s all we know how to do. Everybody’s trying to find the right lane to run in.”

Like a relay team on track-and-field day, once they find that lane, they need to run in it as a team.

“We’re the only crypto native group where the insurance industry and the crypto guys actually sit across the table and thrash out how the heck are we going to issue a policy,” he said. Laying the ground work now will lead to future success, he predicted.

“We’ve had a lot of inquiries from the crypto community,” he said, which is encouraging. Now, it is a process of “how do we get that genie out of the bottle. If we fail in crypto, or the crypto world fails, we fail. If the crypto world takes off, we will have done enough pioneeing where people will want to come in and underwrite risks that we underwrite or underwrite in conjunction with us or offer new coverage that we wouldn’t.”

Crypto markets – why should the insurance industry care?

Of course, the question has to be asked – why get into this bumpy market?

“Because my career has been going into places that no-one else wants to be,” he said. In the 1980s, he ventured into the London market to place risks, and later the higher educational industry, as well as pharmaceutical and medical industries. He ventured into energy risks, from mining to offshore and onshore drilling exploration.

“A lot of people were uncomfortable in getting into that space,” he said. “You had to learn the technology at the time of how they were not going to have these massive claims.”

He recalls underwriters not wanting to underwrite a North Sea oil platform, or underwrite human testing for pharmaceuticals, or underwrite a chemical industry risk to make nitro paraffin in Louisiana.

Even now, he can tell younger insurance industry members about surviving the dark days of The Great Recession, so, volatile economic times are nothing new.

“I knew back in 2007 that the credit market was going to freeze,” he said.

Wild west?

The crypto world has been on a wild ride of late, with trading fluctuations and high profile legal cases, so there are a lot of misunderstandings about it.

“It’s very easy for folks to paint with a broad brush about a particular industry,” he said. “People have compared crypto to the Wild West, right? I actually think it’s a little more structured than that.”

He pointed to the coal mining industry in the Victorian era. Now, compare it to the coal mining industry of today. Two very different pictures emerge in the mind’s eye, much of it to do with safety and equipment.

“Hugely different,” he said. “And the insurance industry had a lot to do with that.”

He admits that there is a learning curve, and one has to “check your ego at every risk.” There are challenges, such as finding more energy efficient ways to mine cryptocurrency.

For insurance, there are different models that are “all over the board,” in how people get paid, risk issued, and how they would deal with a loss.

“The challenge to the insurance community is not to homogenize it,” he said. “It’s to take the time to really delve into how exactly they’re doing it.”

What matters now is being “flexible, both from an underwriting perspective, and then from an insurance broker perspective and jump out of their comfort zones,” he explained. “And you know, I really don’t want to write you an omnibus form, because then we’re going to argue at the time you need it most, whether it’s covered enough. Let’s go make sure we know what we want to cover.”

He compares the crypto world of today to the early days of the space race – from Sputnik orbiting our planet in 1957, to Neil Armstrong setting foot on the moon in 1969, a lot happened in one short 12-year period. And there were disasters along the way and near-disasters after (see Apollo 13).

“My comment to the industry and to the brokers that are involved in the industry, and underwriters: we’re talking about getting to the moon,” he said. “There’s going to be bumps along the way.”

Success will depend on “being open minded and being flexible, being curious,” and getting outside of “the insurance paradigm.”

New beginning, new market

At a time when others are thinking of retiring, Burkhardt decided to make the leap into this emerging field.

Not that he hasn’t moved to Florida – he has – and he still enjoys fishing, but his pole is still reserved for holidays and weekends as he takes on a new role as head of insurance with Evertas.

He was approached to join this new firm after years in the insurance business at various posts and locations (vice president at Kraus-Anderson Insurance, regional managing director at Wells Fargo, senior vice president at Sedgwick, among others).

“We’re looking for somebody who really has a grasp of what goes on inside the distribution side of insurance,” he remembered of the pitch from Raymond Zenkich, Evertas’s president and founder. “With your background, I thought you might be into it.”

From sales, to producing, to leading insurance companies as a principal, “you get into all the nooks and crannies of what goes on in an insurance agency,” he said. “You become a jack of all trades.”

He liked getting his “hands dirty,” he said, “because there was a lot of money on the line, depending on what you had to say.”

For more on Evertas, click on www.evertas.com