How Blockchain is Disrupting Insurance Companies with Smart Contracts
How does RiskBazaar propose to conduct insurance contracts?
In a conventional insurance setting, when you purchase an insurance policy, you send your funds to an insurance company and they look after those funds up until the point that you make a claim.
With RiskBazaar there is no conventional insurance policy. Instead, you’re sending your currency, in this case bitcoin, to the equivalent of a digital lock up box where multiple people are assigned keys. Once you have the agreement of (in this case) two or three parties, they use these digital keys to unlock the box. If you have made a valid claim, you then receive the fund from this newly unlocked digital box.
How does this relate to blockchain?
The sending of bitcoin to the digital lock up box, and also the release of the bitcoin from the digital lock up box, are transactions. Those transactions are included in the bitcoin blockchain if they’re in the most current block. One of these transactions in the block will be in the transaction that unlocked the funds from the digital lock up box.
Why is this better?
So in the conventional insurance example, you are fully trusting the insurance company to look after the funds for the duration of your contract - this requires an expensive and onerous regulation. In the RiskBazaar case, there is no one party that has complete control over those funds for the duration of the contract. This means it’s much harder for any one party to run off with those funds before you make the claim.
What are some examples?
I might use RiskBazaar to enter into a contract with my friends that I won’t go to the gym five times in a week. I might enter into a contract with a stranger that I don’t know from Morocco who is insuring me against losing my baggage on my flight to LA. This completely disrupts the conventional insurance business model because this allows for a wide range of policies that insurance companies wouldn't even think of issuing. The possibilities are endless, the future is really exciting, and the future is coming.
