South African insurtech startup InvestSure and insurance partner Compass Insure recently settled their very first claim in what could very well be a new world record time of less than 45 seconds, end to end.
The time is calculated from the second the client incurred an insured loss to the moment the money reflected in the customer’s account. The entire claim process was fully automated with no admin required from the client (not even to report the claim!) and no human intervention to pay the claim.
InvestSure is a product available on the EasyEquities platform. It allows investors to take out insurance against a sudden drop in the value of certain shares as a result of bad behaviour on the part of a company’s management.
Here’s how the first claim went down:
Before the markets opened on 3 July 2018, news broke via various business media publications that a subsidiary of JSE Listed GLENCORE XSTRATA PLC (Glencore) had received a subpoena from the U.S. Department of Justice (DoJ), who sought records on compliance with the Foreign Corrupt Practices Act and money laundering statutes.
The documents requested relate to Glencore’s businesses in Nigeria, the Democratic Republic of Congo and Venezuela. The DoJ usually issues subpoenas when it is investigating a company, which would indicate that at the very least there is an investigation that is ongoing or about to be commenced. This follows revelations in May of a UK Serious Fraud Office investigation into Glencore’s business in DRC.
Glencore shares plunged more than they had in two years on the news – down more than 11% in early trade on the JSE – and hit a low of over 14% on the day. The announcement knocked more than R100bn off Glencore’s market value, costing investors billions of rands.
The news represents allegations of possible corrupt practices by Glencore management – meeting the first trigger of the InvestSure investment fraud insurance policy. The news event was then listed on InvestSure’s public Newsboard within minutes of the news breaking. The related drop in the share price exceeded 10% within the first two days following the news, meeting the second and final policy trigger and making this a claimable event.
And so it was that this Glencore event triggered the world’s first claimable event under an investment fraud insurance policy! Policyholders will be compensated under their insurance policy for any losses suffered which exceed the 10% trigger when they sell their Glencore shares with 30 days of the news event. This effectively caps their losses to a maximum of 10%, regardless of how the stock performs over the next month, if they choose to sell. This is important because more news and information often follows soon after the initial story, which may drive the price down further.
Another world first came the following morning just before 9.30am when an InvestSure client sold his insured Glencore holdings. We received the sell message by InvestSure from EasyEquities via an API. The claim was validated and the value calculated in less than one second. The funds reflected in the client’s Easy Equities account less than 43 seconds later, all without any human intervention! In total, the client had received the funds to invest from the sale of his shares and his claim within 45 seconds of making the decision to sell his shares, thus triggering and reporting a claim automatically. He did not have to perform any administrative tasks such as reporting a claim, answering any questions, or filing any paperwork, either physically or digitally.
He simply sold his shares, triggering an insured loss, and 45 seconds later he had the funds in his trading account.
“An innovative, US-based insurance startup recently claimed the world record for the fastest claim, says Shane Curran from InvestSure. “Based on the information they published, we’ve done better than them, both in terms of claims payment speed and – most importantly – ease and duration of the entire claim process.”
InvestSure has created a great deal of transparency and fairness by informing policyholders of all news events that meet the definition of “management misleading and deceiving shareholders.”
“Our objective is to spell out all the bad things that management can do to trigger a drop in share price,” says Curran. “By the way, if you feel there’s anything missing from the list, you can always contact us directly and we’ll respond asap.
“A claim is automatically triggered if a drop of 10% or more is detected in the relevant share price where management dishonesty is identified as the cause. We then inform all affected clients via email and social media of their right to claim.
“We believe we created a unique product that provides real value to clients at an affordable price that doesn’t significantly erode investment returns where no claimable event occurs. It’s really excited to have gone through our first claims because, as is often said, insurance is only as good as the claim experience.
“We hope to help millions of people to invest with confidence, knowing they are protected from the possible impact of a source of significant uncertainty and risk.”
Compass Insure is the risk carrier behind the claim, and InvestSure is the brains trust that drives this great product. The easy to use, low-cost investment platform, EasyEquities, is the only place this product is currently available.
“So if you’re not already an EasyEquities investor, then InvestSure is yet another good reason to sign up!” says Curran.