We insure things that are vital to us and help us in providing bread and butter to our family. Common people get their houses, health care, and automobiles covered under insurance. Most of the Hollywood celebrities and sports athletes have insured their body parts. Sania Mirza has insured her hands and Lionel Messi has injured his legs.
Though it sounds strange, at least they’re valid insurance policies because they deal with survival. But there are a lot more crazier insurance concepts. For example, across the world, around $10 million dollars have been recorded in an insurance policy that covers alien abduction. Weird enough.
Thus, insurance companies are beneficial to people. But, in the 21st century, even they are prone to multiple cyber hacks and discrepancies. When certain companies leak customers’ data, the overall trust in the sector is hampered.
So, how do we deal with this?
With decentralized finance (DeFi) insurance.
Let’s discuss more on what’s DeFi insurance, how it tackles the shortcomings in a centralized insurance company, and how profitable it could turn out as a business.
It’s reported (and obvious) that people have trust issues with insurance companies. Mainly because either they become financially unstable or involve in conspiracies behind the customers. This often leads to abrupt shutting down of the organization.
Not just insurance but any centralized server is subjected to the data breach. However, since the insurance sector deals with money and private information of millions of customers, it’s high time organizations scrutinized and strengthened their security protocols.
Poor manpower resources, occasional inefficient training, and false promises. These are the causes that result in multiple manual errors in the working process involved in data management and lead to life-changing losses.
Another branch of trust issues arises from the board members. Often they tend to hide their incompetency, faults, and other vile backstage decisions. Sometimes, they advertise without disclosing the high premium involved. It could only worsen their brand authenticity.
Alarming fact - political influence is found in the majority of insurance companies. This cannot be prevented by a common man. Also, external factors like natural commodities can sometimes destabilize the organization, and its users would have no idea if they’d be covered after the disaster. All points to transparency and trust issues, again.
When Hurricane Maria decimated Puerto Rico in September 2017, unfortunately, most of its country people were left uncovered. In fact, reports claim that 11,000 citizens were still waiting for their claims to be settled.
In 2015, Anthem Insurance companies (USA) suffered a major data breach in which the data of its 78.8 million users were exposed. It included users’ names, birthdates, addresses, and phone numbers. It was not revealed if the data was sold on the black market. To make the matter worse, Anthem Insurance had to spend around $375 million to restabilize the security protocols and recover from the hack.
Decentralized finance’s core base is blockchain technology. It’s made secure by cryptography algorithm and private wallet keys. Security is a national concern but decentralization systems have effortlessly restored the safety of users’ funds and data.
The reduction of human resources does not hamper the work. In their place, smart contracts, the automated pre-set codes (or) agreement between organization and customers, execute the functions based on the conditions set. Hence, accuracy is 100%, costs are highly reduced, and conflicts are basically zero.
Since the system is decentralized and there’s no third-party or a centralized organization involved, it promotes more trust and confidence among users. Every transaction made is public on chain and pseudonymous. Also, with governance tokens users get to command the functionality of the system.
With the help of a risk-sharing pool, Nexus Mutual has created decentralized insurance on Ethereum. Members govern the pool and their rights are represented by NXM token. Anyone can purchase insurance on any public Ethereum smart contract. So, users’ assets deposited in DeFi protocols like Dharma, Compound, etc are insured.
Etherisc is a platform for decentralized insurance applications. With product templates and insure license, anyone can create their own insurance products.
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It’s a platform for insurance swaps. Traders can protect their funds from hacks on other exchanges. Their target audience is crypto users because they prioritize the security of users’ assets.
Apart from these DeFi insurance platforms, decentralized finance can be used to replace the conventional systems involved in regular insurance policies like healthcare, automobiles, and houses.
Now that we know the challenges faced by traditional insurance organizations, imagine the breakthrough a DeFi insurance could provide, after it sorts all the existing issues.
Here’s the total market value of the above-mentioned three DeFi insurance protocols.
Osiz Technologies, a leading DeFi Development Company, has 10+ years of experience in blockchain technology. Our pool of blockchain architects and DeFi developers are guaranteed to deliver quality DeFi development services to launch your DeFi insurance company.
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