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Insurance companies run on two things: 1. Pooling risk 2. Knowing the customer By pooling millions of clients they lower the volatility and thereby achieve a
by Grustaf 5y ago
Insurance companies run on two things:
1. Pooling risk
2. Knowing the customer
By pooling millions of clients they lower the volatility and thereby achieve a sort of risk/reward arbitrage compared to the customer. Insuring a single individual without diversifying the risk doesn’t work, you need the pooling. You also need to know the customer, so you can assess the risk, in order to properly price it, and avoid scammers.
It seems you are proposing a system where both of these are eliminated.
It might be possible to build something, but I have yet to see any convincing attempt. Actually, I haven’t seen any concrete outline how it would even work in theory, only hand waving.
Do you have any suggestions at all?
Btw, what you described not only doesn’t make sense because of my two points above, it isn’t really decentralized, and it doesn’t need crypto.
- TimJRobinson 5y agoThe insurance startup is the one that's verifying customers and getting them signed up. Then they get the financial backing via investors from this global liquidity pool. They put the proposal out there, investors put money in, then they have the liquidity to make their company a reality. https://etherisc.com/ https://etherisc.com/ is working on many different forms of decentralized insurance atm.
- Grustaf 5y agoOK, I spent some time on the website but can't really see how this is "decentralised" if customers have to sign up with them. Or is the innovation here to let more people put up the money? For the benefit of whom, the investors? The insured will likely not care.
- rank0 5y agoSo why is defi necessary to make this happen? I feel this vision defeats the whole purpose of defi. The Kenyan farmer still needs to sign up with a centralized insurance provider. The insurance provider also now needs to overcollaterize their loans...and at that point why not just cut out the middleman defi pool and use that capital to run as any traditional insurance provider would? In any scenario you still need a company to vet/insure the farmer.