Every Dollar [or $.0000001] counts. Can you count on insurance to chip in?

TLDR: Web3 and Blockchain will provide the tech and tools that allow you to be paid micropayments for your data, your experience, your expertise, and your contribution to your decentralized community.

Micropayments aren’t a new concept. While the idea popped up in the 1960s, the 1990s brought some promising use cases. With the promise of the internet, there were high hopes that people could pay fractions of a cent for curated content. It didn’t take off because the cost to use traditional payment processor and the complexity of fractions of a cent outweighed the every day reward.

Yesterday, I sat down to watch Swan Song on AppleTV. Side note: watch it! It is so good. In one scene, Mahershala Ali pays for item without taking out cash or a credit card. Just some sneaky and built in tech. The movie doesn’t dig in to how that happened — just a quick passing scene. It got me thinking about the past promise of micro-payments and the future potential of micropayments. So, how would it work in the context of a decentralized insurance program?

How to pay your premium and make money

Revenue Stream 1: Your Data has value — and it should belong to you.

Insurance companies use data to help structure rates. Since this data is about you, shouldn’t you control it? If they want some data — you can sell it to them. Anonymously. They don’t need to know your name and where you live and what you had for dinner last night. You share what you want with who you want and you are paid a micropayment for that data.

I know this may sound a little off the wall, but let’s break it down. Data in the insurance world is extremely valuable. Insurance carriers often over-state that impact that data has on lowering insurance rates. However, the vast majority of data points that they receive are form third party vendors. The National Association of Insurance Commissioners has had a committed investigating this since early 2010s — a noble and necessary effort. With reports of “price optimization” [an algorithm that insurers use to determine how much they can raise their rates before a person starts shopping] and “claims optimization” [an algorithm to help insurers identify who will accept a low claim offer], there are certainly concerns surrounding the use of data.

Revenue Stream 2: What’s your area of expertise? Get paid for it.

Think of all the various departments and third party vendors that contribute to the overhead and expense of an insurance company. Perhaps you could contribute in a big, medium, or small way to help them out. Currently, you don’t have that option. With a decentralized system, you can participate. Consider:

You have specific domain knowledge based on your career, education, or experience. Perhaps you have a strong background on the value of antiques. You could be paid a micropayment to participate in the valuation of a piece of furniture. Or maybe you’re paid to provide your legal opinion. Of course, there is value for underwriting experience, claims experience, etc.

Revenue Stream 3: Help find a lost or stolen item.

Like micropayments, rewards are certainly not a new thing. But they way they are handled, that is. As Web3 and Blockchain reach wider adoption, the ability to participate in the “reward” will make the process much more efficient. Oh no, my guitar was stolen when I was in World City, USA. I’ll file a claim and the insurance company can notify all parties on-chain what to be on the lookout for. Participate and get paid.

Revenue Stream 4: Be a good decentralized citizen. Participate. Get Paid

The future [well, in the form of Web3 at least] is build on community. Rewind way [way, way, way] back and the concept of insurance was also built on community. I have something that needs protection and so do you. So, we work together to protect our “stuff” and in the event we suffer a loss, we support each other. Over simplified — but you get it.

Welcome to the Web3 insurance community. Claims will be filed. When they are, a claims reward pool will also be established. Review the info presented, participate with your other community members to validate the claim, and get a piece of the reward pie. Also over simplified — but that is the premise.

Revenue Stream 5: Make some investment money.

Earn yield on your premium dollars and investment income on the overall premiums contributed. That sums that up.

Honorable Mention: Not really a revenue stream, but certainly a cost saver.

This is on the list because it is the result of all of the above working together in a community setting. When the community works together to leverage the decentralized resources at their fingertips, it has an impact on the claims filed and profitability of the group.

If the “pool” of people in the community have a great year and losses are low, that means there are more funds in the community “pool” to pay for losses in the coming year. That means the premium contribution required by each member is much lower. That means the money stays in your pocket. Good job, Community.

Many of these transactions could be tiny. Unlike fiat currency, ALGOs [the currency of Algorand blockchain] can be broken down to microalgos — or 10^-6. Roughly $0.0000001. Heck, we are already trying to determine if there is a place in the traditional financial market for the penny. That shows you how cumbersome micropayments are off-chain. On-chain, however, these little payments can add up. How many times do you think your data is currently used? How much money do you think is currently earned on insurance investment income? I could share the data with you, but first sit on it for a little bit. What if you got some of that income? What if you were paid when you decide to share your data.

It is definitely time we took a big step outside the box and looked back in. I say this just about every time I talk about decentralized insurance: the concept of insurance is a noble and important one. Insurance carriers aren’t necessarily out to deceive consumers — but the process leaves a lot to be desired. The Web3.0 future of insurance doesn’t remove insurance carriers from the marketplace, it just provides a new set of rails to take us into the future where we can all be part of the winning party. And maybe, just maybe, we’ll spend our new found money on an item without having to take out our credit card, cash, phone, change, IOU, barter…….

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Adam Hofmann

Building a Democratized Risk Insurance Protocol. I believe in decentralization and the utility it provides. 21 Years in Insurance and still a Musician at Heart.