Blockchain and in particular smart contracts are perfect for a peer to peer insurance model. The insurance platform provides a platform where the insurance demand can be specified by a customer.
The platform uses an algorithm to perform calculations based on risk models. The algorithm calculates a premium for the customer. Based on the risk model and the calculations investors can now bid on the demanded insurance.
Smart contracts can guarantee this payment form. The smart contract is programmed in advance in the case of the insured event happens the payouts is made but without any third party involved such as an insurance company.
By the execution of this by a blockchain the administration and payout process are simpler and almost fully automated. This makes the process more transparent and cheaper.
Peer to peer insurance
Peer to peer insurance is made by up by two parties without a middle hand such an insurance company. This can easily be done thanks to blockchain and smart contracts technology.
Stratumn has, in partnership with Deloitte and Lemon Way, created a micro-insurance technology. The insurance technology is the first proof of concept for sharing economy. Lenderbot makes it possible for people to create an insurance for small high-value items (smartphones, tablets, cameras) between individuals for just a few days.
The decentralized nature of blockchain technology is perfect for insurance. Insurance practical means that many people pay a small amount of money into a central authority. The task of the authority is to make sure the money is only distributed when an actual accident has happened. This is done to avoid fraud. Also, the third party makes a proportional payment according to the accident. The authority takes a quite large amount of money to perform these two tasks. Blockchain technology can solve these two tasks in a much more cost-efficient way.