Author Topic: [VIDEO] Explanation of BitShares Insurance DAC  (Read 15027 times)

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Offline toa

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Health insurance is pretty complicated. However, this model is not solely for health insurance. And as far as health insurance goes. There are different ways of implementing it. Namely, you don't have to have a DAC that pays out chronic or disease related risk. It could potentially just act in concert with more traditional health insurances. For instance... A DAC that only covers acute and physical trauma, like a bike accident. An accident with a saw, getting struck by lightning etc. Of course some peoples activities put them in higher risk, but it is easier to find out and prove if an accident happened that was covered. Extreme mountain biking or climbing Mt Everest probably wouldn't be covered. Or also potentially just an insurance that covers deductibles on traditional existing high deductible insurances. Lots of ways to play around with it and find the appropriate use case.

Offline gyhy

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Offline luckybit

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Offline stuartcharles

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You are right, the insurance shares would have to expire or new customers would subsidize old customers.

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Offline bytemaster

You are right, the insurance shares would have to expire or new customers would subsidize old customers.
 
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Offline gamey

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I don't understand this.

So when the pool pays out above expectation and is short on funds, what is the incentive for people to buy more shares ?  They will be carrying the weight of the people who have already bought shares, but for whom there is no longer corresponding funds.  (Correct ? )

Why wouldn't new customers go to a newly freshly made DAC that doesn't have a lot of shares on the books with no corresponding value ?

Because of this behavior this mutual aid society would more vaguely resemble a pyramid scheme.  It assumes there will be fresh customers who do not act in their owe economic interest.

I also am doubtful that you could ever create a prediction market around individual adjusters that would be accurate.  How would that work?  The sharp participants call up the adjuster's family to make sure everything is going ok ?  You can't put everything in a prediction market and just expect participants... It is likely the fraud produced by an adjuster could mitigate the reputation by funding his own stock.

I don't want to be a smart ass, but I would rather bitshares finds more workable markets. 

Maybe I misunderstand this, but it seemed to me the idea is to buy shares one time and have them good for life.  The problem is early adopters get insurance/service for the full life and those who buy in later do not.  This is why you have premiums and you buy per risk per unit time.  That is just how it works.  The Shares need to cancel themselves after a certain time or your underlying economic model is flawed.
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Offline bytemaster

:-\ regardless what you call, you are still:

A. accepting liability thus guaranteeing payment in case of loss or damage
B. Gambling on an outcome

For this to be a sustainable profitable business and not a "game of chance", an "educated guess" is required. That would require actuarial tables and decision support beyond the scope of the DAC.

Even then, you would suffer from "negative selection", granting coverage to those most likely the highest risk. To spread the risk and stay solvent, you would need to attract a broader universe comprised mostly of those not needing or seeking you.

Insurance premiums are more about managing risk and less about market forces and chance.

This would not make profit from the insurance aspect (only from transaction fees).    The actuarial tables would be public for all participants to know whether or not to buy.     Negative selection is only an issue when insurance is based upon the Obamacare principles of 'everyone in one pot'... the reality is that each pool should be specific enough that there is no significant risk variation between members.    This is perhaps the most important thing.  If you had a health insurance policy that only contained 'white, non-smoking, 20 year old males who don't do drugs, drink, and weigh less than 200lbs'  then the premium would be very low.  If you start throwing in fat, drug abusing, 40 year old pregnant women into that same insurance pool then you would have the negative selection bias.      For this reason the 40 year old drug abusers would be on their own plan and pay a much higher premium. 

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Offline unimercio

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 :-\ regardless what you call, you are still:

A. accepting liability thus guaranteeing payment in case of loss or damage
B. Gambling on an outcome

For this to be a sustainable profitable business and not a "game of chance", an "educated guess" is required. That would require actuarial tables and decision support beyond the scope of the DAC.

Even then, you would suffer from "negative selection", granting coverage to those most likely the highest risk. To spread the risk and stay solvent, you would need to attract a broader universe comprised mostly of those not needing or seeking you.

Insurance premiums are more about managing risk and less about market forces and chance.

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Offline CWEvans

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As Bytemaster points out above, this is not just for the USA and the EU. This kind of thing could work in the international medical tourism field.

Offline phoenix

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Would the MAS have relationships with the medical industry to transact the payments of claims? Or would the MAS simply pay the shareholder the relevant amount and not deal with any third parities?

It wouldn't have any built-in mechanisms for dealing with third parties, but eventually hospitals might start considering this a valid form of insurance, and then they might want to develop their own interface for verifying insurance amounts. Hospitals might even become adjusters, since they know exactly how much your claim is really worth.
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Offline bitcoinba

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Would the MAS have relationships with the medical industry to transact the payments of claims? Or would the MAS simply pay the shareholder the relevant amount and not deal with any third parities?


Offline CWEvans

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Most people will be paid out immediately because even with normal insurance the claims can be paid from revenue on average. 

One way of addressing this is through deductibles. If the MAS is set up to cover members for catastrophic events with high deductibles, then only rare events above a certain cost will be covered, which will give the MAS time to collect member contributions.

Also, once credit DACs become available, injured parties might be able to borrow from them and repay with MAS payouts over subsequent periods.

Offline bytemaster

I don't think you fully appreciate the model.  Most people will be paid out immediately because even with normal insurance the claims can be paid from revenue on average. 


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Offline wasthatawolf

Note: if the claim is valid, then the risk was there the whole time and the guy who was buying 20% of the insurance was subsidizing everyone else.  Also note, that you will eventually receive your payout as the long-run averages are all that matter.

Most of these things are just tweaks to the basic framework.

It's a mute point whether the guy with 20% of the insurance DAC shares was subsidizing everyone else because it's still an additional, and significant, risk that I as a potential customer would need to consider before buying a policy in this system.

With your model, the traditional insurance policy workflow is essentially reversed. 

If I want prompt payment of my coverage once I file my claim, I would need to pay a much higher premium (buy more shares) all at once instead of buying them over time.  This kind of defeats the whole purpose of insurance.  When I'm insuring something I want my coverage to be paid out immediately if I file a valid claim.  I don't want to be paid out slowly over time, I want to pay IN slowly over time.  While I could eventually accumulate enough shares by buying them over time, theres a long initial period before I can accumulate a significant portion of shares. 

Any good insurance company pays out claims immediately and has a good legal team that goes through subrogation to recover any funds that were claimed fraudulently.  They also mitigate their own risk by buying reinsurance on the policies they write. 

I don't know how your model will be able to compete with conventional insurance.  Policy holders would, at the very least, need an additional outside policy to supplement their claim amount while it's slowly being paid out by the DAC.