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Maybe the lower premiums would cancel out the amount that real world insurers can make. Though I kind of agree with you that having a bunch of money sitting the

by jtchang 10y ago

Maybe the lower premiums would cancel out the amount that real world insurers can make. Though I kind of agree with you that having a bunch of money sitting there doing nothing is bad.

richmarr 10y ago
> ... cancel out... This assumes that investments made with premiums are precisely equal with the margin kept by the insurer. Considering the variety of insurers, insurance products, seasonal variation, etc. this is a pretty wild assumption. That said, insurers do make a profit on their income and make a profit on their investments. They may tell you that they have a negative combined ratio, but it's a misrepresentation, mainly for lobbying reasons. They only include base premiums in that calculation, not all the extras they sell (alloy wheel insurance, key/fob insurance, no-claims protection, etc). Again though, it's worth pointing out that smart contracts aren't going to get regulator approval any time soon... and will probably never have access to re-insurance markets. Customers are also going to have a hard time trusting smart-contract based systems them after recent events. The value of optimising for decentralisation over optimising for disruption* seems negligible in this case. If you can create a crowd-sourced insurance pool there are tons of real tangible benefits, mainly coming from the fact that the customers and "insurer" are economically aligned (unlike a conventional insurer) so the incremental value (and cost) of making it decentralised doesn't seem worth it to me. (source/disclaimer: I founded a p2p insurance startup) Edit: added asterix and list of genuine benefits - Since the "insurer" isn't on the hook for paying it doesn't need whitelists of "permitted" tradespeople, or price lists. - It can share information freely about crime hotspots, health issues, etc. It can act on the customers behalf in order to keep them safe, and a happy customer. - Customers in a pool can work together to solve problems - A pool of safe (and lucky) drivers might see premiums drop to 25% of market rate, which mainly covers re-insurance costs - Knowing the repurcussions of your actions will affect you and your pool group fairly directly may change some types of risky behaviour - Lower incidence of fraud ( * By disruption I mean the proper sense of the word. It's an entirely different business model rather than just being an innovation. )
- joosters 10y ago
  (source: I founded a p2p insurance startup) Interesting! What is its name / website?
  - richmarr 10y ago
    Guevara (heyguevara.com). UK motor insurance. We started after Friendsurance in Germany but before Lemonade in the US.
- kpi 10y ago
  I am a big fan of heyguevara, and happily disagree with you on regulatory approval and access to re-insurance markets: these need to be addressed, and we are happy to have discussions with insurance brokers and regulatory bodies to do that. as soon as those risks are reduced and some examples established, smart contracts will make it very easy for any group of people to start their own p2p insurance with their own parameters and rulesets instead of relying on less flexible central platforms.
  - richmarr 10y ago
    Appreciate it, thanks. Don't misunderstand I totally respect anyone willing to get stuck into this stuff... I just think you're making a rod for your own back by adding this "distributed" requirement. I don't see customers caring about distribution, whereas it would make several areas more difficult to manage... fraud for one. It's cool and all, but it's a walled-enough-garden even without that constraint... a constraint that regulators, reinsurers, etc will find alien and confusing.

by jtchang 10y ago

Maybe the lower premiums would cancel out the amount that real world insurers can make. Though I kind of agree with you that having a bunch of money sitting there doing nothing is bad.

richmarr 10y ago

> ... cancel out... This assumes that investments made with premiums are precisely equal with the margin kept by the insurer. Considering the variety of insurers, insurance products, seasonal variation, etc. this is a pretty wild assumption. That said, insurers do make a profit on their income and make a profit on their investments. They may tell you that they have a negative combined ratio, but it's a misrepresentation, mainly for lobbying reasons. They only include base premiums in that calculation, not all the extras they sell (alloy wheel insurance, key/fob insurance, no-claims protection, etc). Again though, it's worth pointing out that smart contracts aren't going to get regulator approval any time soon... and will probably never have access to re-insurance markets. Customers are also going to have a hard time trusting smart-contract based systems them after recent events. The value of optimising for decentralisation over optimising for disruption* seems negligible in this case. If you can create a crowd-sourced insurance pool there are tons of real tangible benefits, mainly coming from the fact that the customers and "insurer" are economically aligned (unlike a conventional insurer) so the incremental value (and cost) of making it decentralised doesn't seem worth it to me. (source/disclaimer: I founded a p2p insurance startup) Edit: added asterix and list of genuine benefits - Since the "insurer" isn't on the hook for paying it doesn't need whitelists of "permitted" tradespeople, or price lists. - It can share information freely about crime hotspots, health issues, etc. It can act on the customers behalf in order to keep them safe, and a happy customer. - Customers in a pool can work together to solve problems - A pool of safe (and lucky) drivers might see premiums drop to 25% of market rate, which mainly covers re-insurance costs - Knowing the repurcussions of your actions will affect you and your pool group fairly directly may change some types of risky behaviour - Lower incidence of fraud ( * By disruption I mean the proper sense of the word. It's an entirely different business model rather than just being an innovation. )

joosters 10y ago
(source: I founded a p2p insurance startup) Interesting! What is its name / website?
- richmarr 10y ago
  Guevara (heyguevara.com). UK motor insurance. We started after Friendsurance in Germany but before Lemonade in the US.
kpi 10y ago
I am a big fan of heyguevara, and happily disagree with you on regulatory approval and access to re-insurance markets: these need to be addressed, and we are happy to have discussions with insurance brokers and regulatory bodies to do that. as soon as those risks are reduced and some examples established, smart contracts will make it very easy for any group of people to start their own p2p insurance with their own parameters and rulesets instead of relying on less flexible central platforms.
- richmarr 10y ago
  Appreciate it, thanks. Don't misunderstand I totally respect anyone willing to get stuck into this stuff... I just think you're making a rod for your own back by adding this "distributed" requirement. I don't see customers caring about distribution, whereas it would make several areas more difficult to manage... fraud for one. It's cool and all, but it's a walled-enough-garden even without that constraint... a constraint that regulators, reinsurers, etc will find alien and confusing.