A truly decentralised P2P Insurance • Hacker News Board

Re: A truly decentralised P2P Insurance

#21

Post by richmarr » Tue, Sep 13, 2016, 8:27 AM UTC

joosters wrote: post #18

mbrock wrote: post #16

Earlier quoted context omitted.

I don't see why Ethereum-based insurance contracts necessarily lock money. For example, the contract could give another address the authority to take risks with some percentage of the deposits, or pretty much any other arbitrarily complicated setup.

If the money isn't available (i.e. locked up in some way by the contact), then the contract cannot guarantee to pay out, making its promises worthless. If you have to rely on a human being to decide to pay out, then the smart contract part of the deal is pointless.

>...pointless

Pointless and unacceptable to financial regulators, meaning nobody will be able to use it for anything worthwhile.

Re: A truly decentralised P2P Insurance

#22

Post by mbrock » Tue, Sep 13, 2016, 8:39 AM UTC

joosters wrote: post #18

mbrock wrote: post #16

Earlier quoted context omitted.

I don't see why Ethereum-based insurance contracts necessarily lock money. For example, the contract could give another address the authority to take risks with some percentage of the deposits, or pretty much any other arbitrarily complicated setup.

If the money isn't available (i.e. locked up in some way by the contact), then the contract cannot guarantee to pay out, making its promises worthless. If you have to rely on a human being to decide to pay out, then the smart contract part of the deal is pointless.

The address given authority to invest the insurance float doesn't have to be controlled by a human—it can represent some other arrangement, for example a stake-voting investment scheme.

Re: A truly decentralised P2P Insurance

#23

Post by icebraining » Tue, Sep 13, 2016, 8:44 AM UTC

planetjones wrote: post #15

vesinisa wrote: post #5

How is e.g. the flight delay insurance decentralized? According to [1] it uses a traditional API to fetch the delay data, which very much sounds like a trusted 3rd party. [1]: http://medium.com/@skarpischek/youll-love-to-be-late-for-dev...

I looked into this before. I just don't get it. There is definitely a trusted 3rd party in play which to me breaks the consensus model of having something decentralised. Maybe you can have many trusted 3rd parties and they all agree I don't know. But then insurance is a lot trickier than just paying out automatically when your flight is delayed. How do you even know the person took the flight. Maybe that doesn't matt…

I'm sceptical of Ethereum, but seems a bit too much to expect a proof of concept to include every nuance of current insurance theory. The question seems to be: is it impossible to model those problems using smart contracts? If not, it'll be done eventually.

Re: A truly decentralised P2P Insurance

#24

Post by richmarr » Tue, Sep 13, 2016, 8:57 AM UTC

jtchang wrote: post #10

joosters wrote: post #6

How can Ethereum-based insurance products ever be competitive? For an insurance smart contract to work, all the money must be tied up in the contract (otherwise, there would be no way to guarantee that you could be paid out). But in the real world, insurers don't just leave their money sitting uselessly in a pot, they put it to work, investing it. So the smart-contract based insurance is always going to be less effic…

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.

> ... 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. )

Re: A truly decentralised P2P Insurance

#25

Post by Scirra_Tom » Tue, Sep 13, 2016, 8:59 AM UTC

What's stopping someone putting a lot of money on an insurance policy then calling in a fake bomb threat on the plane? Pretty low risk way to make money from anywhere in the world.

Re: A truly decentralised P2P Insurance

#26

Post by joosters » Tue, Sep 13, 2016, 9:09 AM UTC

richmarr wrote: post #24

jtchang wrote: post #10

Earlier quoted context omitted.

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.

> ... 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 misrepresentat…

(source: I founded a p2p insurance startup)

Interesting! What is its name / website?

Re: A truly decentralised P2P Insurance

#27

Post by usgroup » Tue, Sep 13, 2016, 9:11 AM UTC

donkeyd wrote: post #17

How does a system like this detect and cope with insurance fraud?

... by limiting it to events that can be reliably determined. E.g. was the plane late or not?

Re: A truly decentralised P2P Insurance

#28

Post by joosters » Tue, Sep 13, 2016, 9:12 AM UTC

mbrock wrote: post #22

joosters wrote: post #18

Earlier quoted context omitted.

If the money isn't available (i.e. locked up in some way by the contact), then the contract cannot guarantee to pay out, making its promises worthless. If you have to rely on a human being to decide to pay out, then the smart contract part of the deal is pointless.

The address given authority to invest the insurance float doesn't have to be controlled by a human—it can represent some other arrangement, for example a stake-voting investment scheme.

It doesn't matter how many hops there are between the insurance contract and the money, if the cash isn't sitting idle on the blockchain, the insurance contract cannot guarantee to pay it out.

Re: A truly decentralised P2P Insurance

#29

Post by richmarr » Tue, Sep 13, 2016, 9:28 AM UTC

joosters wrote: post #26

richmarr wrote: post #24

Earlier quoted context omitted.

> ... 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 misrepresentat…

(source: I founded a p2p insurance startup) Interesting! What is its name / website?

Guevara (heyguevara.com). UK motor insurance. We started after Friendsurance in Germany but before Lemonade in the US.

Re: A truly decentralised P2P Insurance

#30

Post by kpi » Tue, Sep 13, 2016, 9:56 AM UTC

kbody wrote: post #7

Any example that this would be useful and most of all actually applicable to real-world? The example of air flight delay is already done (see: https://www.airhelp.com ) with much better payout. The problem I see on such "presentations" is that they focus on abstract ideas instead of taking a pragmatic approach of how to actually make it usable on a real use-case outside of the experimental playground. Sorry for the r…

airhelp is one of many services which deal with compensation claims which are mandated e.g. by EU regulation and take a good cut of the payout for trying to make a really cumbersome process less bad. the customer experience of claiming compensation is in my opinion much worse than a fully automated payout and the whole process a real pain for both customers and airlines.