The Four Pillars of Decentralised Insurance

inSure DeFi
5 min readJan 5, 2021

InSure’s Decentralised Finance (DeFi) and cryptocurrency insurance system is based on four fundamental pillars:

  • Dynamic Pricing Model
  • Capital Model
  • InSureDAO voting mechanism
  • Immutable transactions

1) Dynamic Pricing Model: to find the right market price via supply and demand.

As we venture into 2021 and deeper into the new frontier of the Web 3.0 Space, new ways to personalize and differentiate insurance within digital markets will be increasingly sought after.

Approaches such as “pay as you want” or “freemiums” are evident examples of different approaches utilised by digital markets that may encourage customers to participate in pricing decisions and feel empowered about the price they pay for a product or service (Reisman et al 2019).

The end goal of such schemes is to improve both customer satisfaction (from a reasonable price, reduced risk and value gained from the product or service) and the supplier (enhanced market capitalisation, diversified and valued products or services and improved customer insights and relationship development).

The ultimate goal of dynamic pricing and it’s inevitable simultaneous learning process is to develop pricing policies that integrate the intrinsic uncertainty of price and expected demand into account — a continuous process of optimisation while mutual risk pools continue to grow.

Figure 1 Practical dynamic pricing and revenue forecast from flexible pricing strategies aligned with SURE utility token.

Above all else, price transparency on the consumer end is key allowing for risk to be equally shared by those staking SURE tokens. Price listing on Crypto exchanges allows for transparent checks and balances — a fundamental part of a reliable insurance system.

2) The Capital Model

The Capital Model is used to monitor systematic risk, and give the capital pool attractive risk adjusted return.

Insurance as an industry is highly leveraged, meaning, it functions from borrowed capital as a funding source to expand the asset base and generates returns on risk capital through investing. Leverage is technically an investment strategy using borrowed money. The primary concern of InSure’s insurance capital model is to calculate the capital required to guarantee solvency of the risk pools to some arbitrary and high confidence level (ie >99%).

The Capital Model helps calculate the minimum capital that the fund needs to hold and is used to determine: 1) the capital locked in the Capital Pool and 2) the staking power used in staking.

3) InSureDAO voting mechanism

InSureDAO voting mechanism ensures every claim is handled in a permission-less and transparent manner.

One of the most important parts of insurance schemes is claims. This is also the be-all-and-end-all for traditional insurance, as DeFi insurance aims at ridding the tediously slow and unfairly expensive to the majority of customers. Not to mention the time it takes and the tiring process. DeFi insurance is set to improve our future 21st century societies and optimise this hindrance.

To ensure InSure claims are handled professionally, a 3-phase voting mechanism is utilised for assessment of claims. A claim is submitted by any policyholder. 100% Premium equivalent SURE tokens are staked to file the claim. The claim request will to be signed with the Ethereum Wallet of the policy holder.

After a 7-day claim process, a second phase of voting is to be accomplished by the top auditing companies as chosen by inSure token holders. Auditing companies will stake their InSure holdings to vote and release auditing reports where required. 5% of the reserved policy premium will be utilized to incentivise the auditing companies and a decision is made with majority consensus over any given claim assessment. If consensus is not reached or there are not enough auditing companies’ votes, then the case will pass to the next phase.

During the pending phase, policyholders can stake inSure tokens and start a challenge. If there is no challenge by any inSure holders, then the claim will be approved and paid. If there is a challenge, then the claim assessment will escalate to the third phase — a public vote. This is where peer-to-peer community-based insurance and blockchain thrives. No reliance on the middle-man. Democratic votes.

The first phase of this 3-phase voting can be substituted with a lighter round of voters as decided by the inSureDAO.

4) Immutable transactions

“Never modified or deleted”

In the blockchain, the logs of transactions, once validated by the chain’s participants, can never be changed. Immutability is pretty much the unchangeable blockchain ledger and the ineditable blockchain data. Transparency. It is one of, if not, the key function and feature of our current blockchain technology. It enables smoother, more efficient and cost-effective data auditing, which is key for optimised insurance processing. Smart contracts embedded.

Be sure to check out InSure’s website, discover how you can not only secure your crypto portfolios via DeFi insurance, but also how InSure allows you to invest and profit from your insurance via SURE tokens.

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Cummins, J.D. and Danzon, P.M., 1997. Price, financial quality, and capital flows in insurance markets. Journal of financial intermediation, 6(1), pp.3–38.

den Boer, A. V. (2015). Dynamic pricing and learning: historical origins, current research, and new directions. Surveys in operations research and management science, 20(1), 1–18.

Emms, P., 2007. Dynamic pricing of general insurance in a competitive market. ASTIN Bulletin: The Journal of the IAA, 37(1), pp.1–34.

Reisman, R., Payne, A., & Frow, P. (2019). Pricing in consumer digital markets: A dynamic framework. Australasian Marketing Journal (AMJ), 27(3), 139–148.

Scandizzo S. (2016) Economic Capital Models. In: The Validation of Risk Models. Applied Quantitative Finance series. Palgrave Macmillan, London.



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