What sparks will be generated when the blockchain collides with the parameter insurance?

Defi Baize Research Institute 2021-10-14 07:11:09

Original title | 《 Blockchain application : Parameter insurance 》

Original author | Anh Le

compile | Baize Research Institute

The market scale and potential of parametric insurance are huge , Because the rapid spread of the epidemic has hurt almost all countries in the world ( For example, East Asia and the Pacific 、 North Africa 、 Latin America 、 In the Middle East 、 Europe and Central Asia ). But we don't have a scalable and effective way to automate insurance , Therefore, this also leads to more and more insurance companies using parametric insurance .

Parameter insurance , Also called index insurance , It is a new type of insurance in recent years . Its compensation no longer depends on subjective artificial loss determination , It depends on the trigger of objective events , For example, the level of Typhoon 、 Magnitude of earthquake 、 Occurrence of flight delay, etc . To ensure objectivity , The occurrence and level identification of trigger events are generally carried out by an authoritative third party , For example, relevant government departments ( meteorological bureau 、 Seismological Bureau ) etc. .

The main components of parameter insurance are :

  1. A predetermined contract , Its terms shall be agreed by the parties .
  2. Triggering event , For example, natural disasters or weather events .
  3. Automatically implement the contract policy according to the pre agreed terms .
  4. payment , Means immediate and effective settlement .

Blockchain based parameter insurance

Use the language of blockchain , All parties in the parametric insurance plan can be considered as participating in the distributed ledger and point-to-point network . for example , The data in this network may include details of insurance policies and records of trigger events . Digital signature and hash data chain with encryption can prevent data rollback . The blockchain algorithm ensures the effectiveness of transactions through consensus among network participants . Then the smart contract is automatically executed according to the verified trigger .

Blockchain background information :

Blockchain is a distributed system 、 It's usually a public digital ledger . In short , Blockchain is a system for recording information , It makes the system difficult or impossible to change through the following key elements 、 Crack or cheat :

block

Blockchain consists of blocks 、 Time stamp 、 Hash and encoded records consist of , And link in the chain . contrary , This iterative process also confirms the integrity of the previous block , If it is traced , Will return to the original creation block .

Decentralization

Blockchain is managed autonomously using peer-to-peer networks and distributed timestamp servers .

Public key cryptography is usually used to ensure the security of data on the network .

Consensus mechanism

Record the blockchain ( Or data ) Any update to the requires the consensus of most people on the network .

From incremental modification of Nakamoto consensus agreement to innovative alternative consensus mechanism ( For example, Byzantine fault tolerance algorithm ), Many consensus protocols have been proposed to improve the performance of blockchain network itself or adapt to other specific application requirements .

Market potential of blockchain based parametric insurance

benefits :

  1. Parametric insurance can help cover losses other than federal bailouts .
  2. Use parameter insurance compared to indemnity insurance , The time between catastrophic events and compensation is usually much shorter .
  3. Parametric insurance can help pay deductible expenses or damages beyond the limits of traditional compensation insurance , Or compensate the sub limit or excluded items specified in the insurance policy ( for example , Indemnity insurance does not cover losses other than damage to tangible assets ).
  4. If the government's reserves are insufficient , Parameter insurance can act as “ Safety net ”, And it is more resistant to political pressure to spend premiums on other aspects .
  5. Parameter insurance is important to the whole value chain of insurance ( Here's the picture ) Have a potential impact —— In product development and distribution 、 pricing / Underwriting 、 Payment and collection 、 Claim demage 、 Administration and risk management , The insurance market began to favor it .

How to improve flight delay through parameter insurance ?

Blockchain

Digital technology is increasingly changing customer behavior . In view of this trend , Advanced technologies such as blockchain and machine learning have brought new opportunities to various industries . Different industries are now competing to become early adopters of digital technology .

especially , Compared with traditional methods, the parameter insurance used by blockchain shows obvious advantages , And increased customer engagement . Most of the expected value of the insurance blockchain is to reduce operating costs . This is mainly through simplifying claims and underwriting , Especially in an emergency , The increase in customer liquidity will have the greatest impact . However , Data maintenance is essential , Because the blockchain will not verify the accuracy of data from external resources ; therefore , avoid “ Garbage goes into , Garbage out ” The situation is crucial .

Compared with traditional insurance , The parameter insurance supporting blockchain has a series of advantages , Especially in catastrophic events . To be specific , The added value of parameter insurance is : Reduce management and operating costs , Automate claims and underwriting processing , Provide quantitative indicators for traditional insurance and insurance not covered in traditional insurance , Speed up payment , This will lead to a rapid increase in customer satisfaction .

Traditional industries

Several use cases in the financial industry show the obvious potential of blockchain application , Parametric insurance is considered to contribute to the future of the insurance industry . for example , Leading Swedish insurers are increasingly interested in adopting digital strategies .

On the other hand , Young insurance companies are also slowly adopting technology . In Russia , Blockchain and machine learning deployment focus on claims settlement 、 Rate setting and actuarial calculation . In terms of distribution channels , Young insurance agents use Facebook and LinkedIn most . Independent consultants and brokers are the two main channels for most claims .

From the perspective of market segmentation , Enterprise customers are more interested in parametric insurance model than individuals . However , Consumers in Russia and the United States lack awareness of digital insurance solutions . therefore , Although digital behavior has increased , But parameter insurance has not yet reached a mature level .

Compared with traditional insurance , Another specific advantage of parametric insurance is to overcome the challenges that traditional insurance cannot solve , for example , When the customer requires the accuracy of the trading date and time and the authenticity of each transaction right , And when there is a lack of centralized trust authority between several stakeholders and insurers , And the use of all blockchains with competitive incentives .

It is always important to consider the challenges associated with adopting blockchain in the future —— Extensibility 、 Data security 、 Operating costs 、 Regulations and standardization . The scalability of blockchain utilization 、 Maturity of rules 、 Current standards . Data privacy, security and operating costs are problems that need to be solved in the further application of blockchain in insurance industry and other industries .

Overall speaking , Parameter insurance in the context of blockchain shows significant value . However , It's still in its early stages , Being an early adopter will bring obvious advantages . In this regard , The following four problem areas deserve particular attention , Scene planning 、 Technology investment 、 Standard setting and risk assessment .

Use cases

Let's talk in detail about a use case for the success of parameter insurance —— Flight delay insurance . The second largest reinsurance company in the world SwissRe Provide a real-time flight delay insurance platform , If the flight is cancelled or delayed , Passengers can get compensation .

 data

First , The customer download name is 'ʼup in the airʼʼ Applications over the air , Then choose their departure airport and destination airport . then , According to the length of delay , There are several flight delay insurance options related to the compensation plan . Customers at least before departure 36 Hour purchase . secondly , Flight uncertainty will be given by a trusted third party , for example FlightGlobal. Third , Payment pricing will be based on a number of factors , Including longer flight duration 、 flight delay 、 Flight diversions and cancellations ; The pricing algorithm will be used to learn and explore patterns in the data . Last , Flight risks will be managed and reflected in pricing .

The future of parametric insurance

Chainlink and Ethereum classic(ETC) Has been exploring parameter insurance , Due to the pandemic , The exploration of parameter insurance has accelerated . The time is ripe to subvert the insurance industry , Cryptocurrency will forever change financial technology .

​ We may expect to see parametric insurance become the norm in the next few years .

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