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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…
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.
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...
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…
1. Economies of scale needed to deal with regulatory, dept. of insurance, etc.
2. Economies of scale needed to administer policies
3. Economies of scale needed to administer claims
4. Expertise needed in pricing and actuarial
In an ethereum based true P2P system the individual is more or less self insuring and re-insuring their risk via an ethereum contract.
I think there's something worth paying for to be able to say a financial institution is covering you. I have a hard time believing the financial saving for an individual is worth the trouble. I also have a hard time believing the regulatory and administration needs are met without some staff supporting the contract.
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.
the total amount of payouts per flight is limited as well as premiums and individual payouts. there is a non-negligible legal risk of such action and the payout limits in the end will converge to the price of the risk someone is going to take.
Ironically, your system is meant to help compensate people when delays to flights occur yet to me it looks like you've built something that strongly incentivises people to cause more disruption to flights.
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…
Earlier quoted context omitted.
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.
I'm trying to understand what you think is the essential difference between an Ethereum-based insurance scheme and a traditional insurance scheme in this respect.
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…
Earlier quoted context omitted.
the total amount of payouts per flight is limited as well as premiums and individual payouts. there is a non-negligible legal risk of such action and the payout limits in the end will converge to the price of the risk someone is going to take.
The legal risk is zero for someone who is out of the jurisdiction of the US completely (eg in some developing country). Ironically, your system is meant to help compensate people when delays to flights occur yet to me it looks like you've built something that strongly incentivises people to cause more disruption to flights.
I think we will find a way to deal with those issues. Experiments like these will help us (and society in general) to come to the right conclusions. Of course we should be careful not to cause too much harm on the way.
Also see https://www.reddit.com/r/ethereum/comments/529o5p/flightdela... and the discussion there.