For the last 100 years, innovation in the insurance industry has come down to who could make the funniest TV ad 🦎
With #web3 there is finally room for some REAL innovation in the insurance sector
A thread 👇
With #web3 there is finally room for some REAL innovation in the insurance sector
A thread 👇
2/ Traditional insurance is fairly simple:
You acquire a policy which covers a specific type of loss (e.g. general or professional liability, worker’s comp, etc.), up to a designated limit.
You make payments, called premiums, at regular intervals to keep the policy active.
You acquire a policy which covers a specific type of loss (e.g. general or professional liability, worker’s comp, etc.), up to a designated limit.
You make payments, called premiums, at regular intervals to keep the policy active.
3/ Simple enough, right?
Well, probably not. Because if a triggering event occurs, how do you collect on the benefit of your policy?
The answer is, you must go through a lengthy and sometimes frustrating affair known as the claims process.
Well, probably not. Because if a triggering event occurs, how do you collect on the benefit of your policy?
The answer is, you must go through a lengthy and sometimes frustrating affair known as the claims process.
4/ This process usually starts with you submitting your claim, including any supporting documentation, to the company’s claims review department.
Then, an insurance adjuster will be assigned to review and assess your claim.
They determine whether you get a payout or not.
Then, an insurance adjuster will be assigned to review and assess your claim.
They determine whether you get a payout or not.
5/ The truth is, these adjusters are humans who are prone to error and subjective determinations.
And, importantly, they are looking for any defensible reason to reject your claim or give you less than you’re rightly due. To increase their profits #OinkOink
And, importantly, they are looking for any defensible reason to reject your claim or give you less than you’re rightly due. To increase their profits #OinkOink
6/ So here you are: a responsible citizen, with a legit insurance policy, who’s been paying your premiums on time, left to feud with your insurance company, to get them to do what they’ve already agreed to do.
Surely there is another way!
Surely there is another way!
7/ And there is!
Using web3!
Enter the “smart contract”!
A smart contract is a blockchain agreement (written in code) that is self-executing upon the occurrence of a designated event or condition.
Using web3!
Enter the “smart contract”!
A smart contract is a blockchain agreement (written in code) that is self-executing upon the occurrence of a designated event or condition.
8/ Normal contracts require the parties to take action based on the agreement.
Smart contracts do not require additional actions by the parties because a network of computers executes the actions when predetermined conditions have been met and verified.
Smart contracts do not require additional actions by the parties because a network of computers executes the actions when predetermined conditions have been met and verified.
9/ Now, let’s apply this to insurance.
Let’s say you own a house in Florida. Because hurricanes are an everyday reality of life there, it would be wise to obtain flood insurance (or homeowners insurance, or both).
Let’s say you own a house in Florida. Because hurricanes are an everyday reality of life there, it would be wise to obtain flood insurance (or homeowners insurance, or both).
10/ Instead of purchasing traditional insurance, with its cumbersome and unfriendly claims process, you could one day purchase insurance through a web3 smart contract.
With a smart contract policy, you could avoid the frustrating claims process altogether.
Here’s how…
With a smart contract policy, you could avoid the frustrating claims process altogether.
Here’s how…
11/ Suppose you want to insure your house for $1mm.
You could purchase a $1mm policy with a $5,000/mo. premium through a smart contract with an insurer.
This contract would automatically pay out upon the occurrence of a particular event, as set forth in the smart contract.
You could purchase a $1mm policy with a $5,000/mo. premium through a smart contract with an insurer.
This contract would automatically pay out upon the occurrence of a particular event, as set forth in the smart contract.
12/ For example, the smart contract could be programmed to automatically pay you a specified sum in the event the hurricane has sustained wind speeds exceeding 130mph for more than 1 hour.
Once that windy condition is met, you’re automatically paid.
No claims process!
Once that windy condition is met, you’re automatically paid.
No claims process!
13/ Sounds easy enough, but how would self-executing computer code on the blockchain know if the hurricane had sustained winds exceeding 130 mph for longer than 1 hour?
We would need to build physical world reference points into this code-written contract.
But how?
We would need to build physical world reference points into this code-written contract.
But how?
14/ Enter “oracles”!
An “oracle” takes agreed upon real-world data reference points and links them to the actions of a given smart contract. An oracle is the bridge between real-world data and events and the blockchain.
An “oracle” takes agreed upon real-world data reference points and links them to the actions of a given smart contract. An oracle is the bridge between real-world data and events and the blockchain.
15/ In our example, the National Hurricane Center’s wind speed monitor could be the oracle – so when the NHC’s monitor reads 130mph for more than 1 hour, then the condition is met, and the smart contract automatically executes your pay out.
Pretty cool, right?!
Pretty cool, right?!
16/ Chainlink is a good example of an oracle network which provides real-world data to smart contracts, using its native #LINK coin to reward parties for using and validating its services).
17/ So, now you know the beauty of smart contracts – including the oracles that connect real-world data to the blockchain – and how their use can help us reimagine and improve archaic industries like insurance.
Thanks for reading this long thread!
Follow for more like this.
Thanks for reading this long thread!
Follow for more like this.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
