Will Decentralized Insurance Claims Be Better? [at least less paper, right?]
No to better. Yes to less paper.
Thanks for coming. End of post.
But truthfully, it isn’t about being better. There is not a ton of upside to the concept of an insurance claim, right? Something is broken, stolen, lost. It isn’t a real joyous moment. That being said, it is necessary and, on paper, can ensure that the person filing the claim does not have to incur more loss [bills, debt, etc] because of the claim.
That’s on paper.
We hear the stories of claims gone wrong. We hear the stories of settlements, lawsuits, delayed claims, voicemails after voicemails. I could spend the rest of the post pushing out statistics that show that claims are most often handled properly. I could chat about the numerous stories of insureds that were so grateful for the claim settlement. I could, but I won’t. In the end, the perception and challenges in the claims process is much louder than the happy whispers I could share.
So, while Decentralized Insurance can’t make the claims process the shiny present you always wanted to unwrap on your birthday, it can dramatically improve the overall process. It’s a mechanism that fosters support, community, and consensus. Let’s use a property damage claim as an example:
Who are the stakeholders in the claims process? The insurance company, the insured, the claims assessor, the appraiser, the public adjuster, and possibly the retailer that needs to replace or repair the damaged property.
Historically, there is a one side of the table vs the other side of the table perception. If it is in the insured’s best interest, it can’t be in the insurance companies best interest. Let’s put aside whether that is right or wrong and instead focus on the Decentralized Model.
In the Decentralized Model all parties are working together for the greater good [profitability, performance, efficiency, token value] of the community. There is no “other side of the table”. In fact, there is no table. Everyone works together to ensure a quick and just settlement — to be sure there is trust, equity, and honesty in the process.
This is not the time to dig in to the math behind how this works, or how the system architecture is designed. An overview of how the claims process might work in a decentralized system:
- Insured Participant Files a Claim and Stakes Their Share of the Loss
- Money flows from the risk pool to a Claims Vault
- Additional money flows to the Claims Vault as a Claims Reward
- An overall claims confidence score is provided to the community based on both on-chain and off-chain data.
- The community votes [in real-time or by proxy] to approve or deny the claim.
- The money is transferred from the vault to the insureds wallet. And, can easily be transferred to the retailer if necessary to replace the property.
Throughout this process, all information is clear and transparent. Yet, there is no invasion of privacy. The community doesn’t need to know the location, height, eye color, prior history of the insured filing the claim. They do, however, deserve information on the economics of their shared risk pool. For voting in consensus [weed out bad-actors], everyone participating is rewarded.
See. No table. Transparent. Efficient. Equitable.
We’ll jump headfirst into the math and architecture behind this system at another time.