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clout

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Insurance DAC
« on: January 23, 2014, 03:14:41 AM »

I haven't seen anyone in this forum mention the possibility of implementing an insurance company using the technology of the bitcoin blockchain. I don't know how specifically this would work, since the DAC wouldn't be able to assess a clients risk. However if the opportunity cost of pulling money out of the fund were great enough then perhaps clients would not do so except in the case that they actually needed the money for medical reasons. Just throwing the idea out there to get some chatter about it. The distributed technology coincides well with the need of insurance companies to dilute risk over the largest pool of ppl.

Offline bytemaster

Re: Insurance DAC
« Reply #1 on: January 23, 2014, 03:35:35 AM »
I haven't seen anyone in this forum mention the possibility of implementing an insurance company using the technology of the bitcoin blockchain. I don't know how specifically this would work, since the DAC wouldn't be able to assess a clients risk. However if the opportunity cost of pulling money out of the fund were great enough then perhaps clients would not do so except in the case that they actually needed the money for medical reasons. Just throwing the idea out there to get some chatter about it. The distributed technology coincides well with the need of insurance companies to dilute risk over the largest pool of ppl.

Insurance is actually an area I have been carefully thinking about in the background.  It is tricky for the reasons you specify, but there are certain kinds of 'general' insurance that is possible.

The key is to avoid any voting or individual specific data.  So suppose you wanted to insure against a hurricane hitting your city, you could create a prediction market where the price was tied to the estimated damage caused to city X in month M. 

Now suppose you have a house on the coast in X city and you want to insure it against a hurricane, you go to the market and you bet on a hurricane hitting your city every single month.  If nothing hits then your position will move toward 0.  If a hurricane approaches then it will price will move up toward the estimated damage proportional to the strength of the hurricane.   Long after the hurricane people will continue to estimate the damage to the city until a general consensus is reached at which point anyone can cash out and use the profits earned to rebuild.

In this case you make money even if your house isn't destroyed by the hurricane as long as it hits your city.   The more insurance you want the earlier you should buy and the more you should buy. 

Using this same technique, you can insure against plagues, wars, or even unemployment.

What you cannot insure against is the probability that you *specifically* get cancer, are in a car accident, etc.   I think this is what *SAVINGS* is for, general insurance against crap happening to you.   

Otherwise the only service a DAC could provide is accounting but it would be unable to evaluate individual claims due to the need to make judgement calls on issues to small to expose to a market and where information is not widely dispersed in society. 
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clout

  • Guest
Re: Insurance DAC
« Reply #2 on: January 23, 2014, 08:51:38 PM »
I haven't seen anyone in this forum mention the possibility of implementing an insurance company using the technology of the bitcoin blockchain. I don't know how specifically this would work, since the DAC wouldn't be able to assess a clients risk. However if the opportunity cost of pulling money out of the fund were great enough then perhaps clients would not do so except in the case that they actually needed the money for medical reasons. Just throwing the idea out there to get some chatter about it. The distributed technology coincides well with the need of insurance companies to dilute risk over the largest pool of ppl.

Insurance is actually an area I have been carefully thinking about in the background.  It is tricky for the reasons you specify, but there are certain kinds of 'general' insurance that is possible.

The key is to avoid any voting or individual specific data.  So suppose you wanted to insure against a hurricane hitting your city, you could create a prediction market where the price was tied to the estimated damage caused to city X in month M. 

Now suppose you have a house on the coast in X city and you want to insure it against a hurricane, you go to the market and you bet on a hurricane hitting your city every single month.  If nothing hits then your position will move toward 0.  If a hurricane approaches then it will price will move up toward the estimated damage proportional to the strength of the hurricane.   Long after the hurricane people will continue to estimate the damage to the city until a general consensus is reached at which point anyone can cash out and use the profits earned to rebuild.

In this case you make money even if your house isn't destroyed by the hurricane as long as it hits your city.   The more insurance you want the earlier you should buy and the more you should buy. 

Using this same technique, you can insure against plagues, wars, or even unemployment.

What you cannot insure against is the probability that you *specifically* get cancer, are in a car accident, etc.   I think this is what *SAVINGS* is for, general insurance against crap happening to you.   

Otherwise the only service a DAC could provide is accounting but it would be unable to evaluate individual claims due to the need to make judgement calls on issues to small to expose to a market and where information is not widely dispersed in society. 

I've spent the beginning of today attempting to better understand prediction markets. I'm not entirely sure I get the specifics, but it does seem to have some pretty astounding implications. Prediction markets in particular require the level of decentralization afforded by the peer to peer network technology. On the one hand because of the governments ability to shut down a centralized exchange like Intrade.com. On the other, DAC platforms for prediction markets goes hand in hand with Friedrich Hayeks arguments of greater economic efficiency through decentralized sources of information. Obviously you believe in prediction markets as a means of implementing insurance funding, but would you say that the use of these prediction markets could lead to completely autonomous governments, allocating resources based on the predictive power of the markets?

Offline bytemaster

Re: Insurance DAC
« Reply #3 on: January 23, 2014, 09:50:59 PM »
Yes


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Anything said on these forums does not constitute an intent to create a legal obligation or contract between myself and anyone else.   These are merely my opinions and I reserve the right to change them at any time.

clout

  • Guest
Re: Insurance DAC
« Reply #4 on: January 23, 2014, 10:01:14 PM »
Thats dope. I think I'm going to try to write my thesis on it.

Offline fuzzy

Re: Insurance DAC
« Reply #5 on: January 26, 2014, 12:55:35 AM »
Thats dope. I think I'm going to try to write my thesis on it.

Then that would be a dope thesis imho... :)

« Last Edit: January 26, 2014, 03:07:24 AM by fuznuts »
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Offline donkeypong

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Re: Insurance DAC
« Reply #6 on: February 26, 2014, 06:33:13 AM »
I think an Insurance DAC would be awesome. But I wonder if it would need to be worded differently. Insurance, like gambling, is heavily regulated and you need a license (at the state level in the US) to sell it. So essentially you would be hedging with the DAC. I agree that life insurance would be the easiest way to get into this, since the only external legal instrument you would need to verify is a death certificate. Other forms of insurance (car, property, etc.) can get pretty messy.

clout

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Re: Insurance DAC
« Reply #7 on: March 02, 2014, 04:57:01 AM »
I think an Insurance DAC would be awesome. But I wonder if it would need to be worded differently. Insurance, like gambling, is heavily regulated and you need a license (at the state level in the US) to sell it. So essentially you would be hedging with the DAC. I agree that life insurance would be the easiest way to get into this, since the only external legal instrument you would need to verify is a death certificate. Other forms of insurance (car, property, etc.) can get pretty messy.

read the entire thread for an example of how this would be done. life insurance is probably not a feasible option for the reasons stated below.

 

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