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Is there some clever way that someone could make blockchain insurance? Like, a decentralized, transparent, nonprofit system where everyone pools money (probably in the form of some cryptocurrency) together, and then when someone makes a claim there's an algorithm to decide whether it's legitimate and how much money it should pay out (possibly variable depending on how much free money is in the system due to the frequency of past claims).
Legally and practically I don't think you could do this with health insurance due to patient confidentiality issues. But maybe for auto-insurance or homeowners insurance or something? Or if there's a mechanism to anonymize medical records prior to submission. And I've pretty much handwaved away the hard part which would be deciding which claims are legitimate to prevent bad-faith exploitation. But is that solvable? And would this actually be usable if it worked? The goal would be to remove the profit motive from insurance companies taking a cut as middlemen, as well as the adversarial relationship between them and both healthcare providers and patients. I suppose a mostly traditionally run but non-profit insurance company would have some of the benefits, but even those have some potential for corruption, and I'm wondering if a transparent and user-run blockchain thing would clear that.
I thought a bit about this (more in the sense of "what's the leanest insurance company you could build" and "could you create an insurance marketplace with the least amount of intermediation"). I'd say you came to a similar conclusion that this:
is the biggest issue. My thought was that the best product you could try this with is regular term life insurance, because there is a mostly pretty clean way of determining the validity of claims (a death certificate) and because people's desire not to die goes a long way to prevent fraud. You still have the problem with underwriting and adverse selection.
On the other hand, another problem is the matter of counterparty solvency, as an insurer you rely on the law of large numbers to smooth out premiums and claims, if someone in this decentralized network faces claims way in excess of the premiums they have collected, do policyholders get paid less in proportion of how much of their risk did this specific node assumed? You could have everyone put up capital for some sort of compensation pool, but the more things you stack over, the more you end up looking like just regular insurance.
Mutual insurance already exists! Some of the biggest insurance companies of today started as mutuals, I think Liberty still is one.
I am immediately suspicious. Because if so why do they have so many ads? If they're not profit-driven, that seems negative sum.
The incentives facing executives at for-profits and executives at commercially managed non-profits (including large mutuals, and also fee-charging charities like university hospital systems) are more similar than they probably should be given the difference in mission.
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