Token-based Insurance Solutions on Blockchain

TL;DR

This paper presents a comprehensive framework for token-based insurance solutions on blockchain, analyzing their structure, market examples, advantages, and challenges, highlighting their potential to disrupt traditional insurance models.

Contribution

It introduces a general framework for token-based insurance, compares existing solutions, and discusses their benefits and limitations, advancing understanding of blockchain insurance innovations.

Findings

Token-based insurance solutions enable automated underwriting and claims.

Market examples show diverse token functionalities and cover types.

Despite early stage, potential to disrupt traditional insurance industry.

Abstract

With the rising demand for protection against new risks such as loss of digital assets, novel insurance services and products emerge. In particular, token-based insurance solutions on blockchain transform the insurance business by providing cover for new risks and streamlined, (semi-)automated underwriting and claim processes. In the chapter, we present a general framework of token-based insurance solutions, delegating their fundamental building blocks that include core roles, main tokens and assets, as well as key processes and operations. We describe three major token-based insurance solutions in the market and compare them in terms of native token functionality, tokenized cover types, claim assessment process and capital model. Based on the discussion on the general framework and concrete examples of token-based insurance solutions, we summarize their advantages and point out their drawbacks. We conclude that despite being at a nascent stage, the token-based insurance space bears the promise to unseat the incumbent players with increasingly more action taking place and more use cases being explored.