What problems are CoverCompared trying to solve?

Lack of standardized products, policies and processes

The Crypto Personal Insurance Markets is to be worth over $100 billion industry, however, the lack of insurance products targeted towards the crypto industry, the insurance markets are still largely run through basic “take it or leave it” products and has not significantly been adopted by the mass crypto market as they are not any real customized user-centric cost effective options available.

The current crypto product are also so complex to understand that once the policies are sold, the customers are at the mercy of the insurance company to settle off their claims. Many a times, which can be frustrating as the average consumer is not that adept understanding the documentation of such policies.

The Crypto world is yet to establish an online insurance marketplace. Adding to the current situation identified, there are no policy management platforms within the crypto space. For CoverCompared to successfully launch decentralized technologies capable of solving the problems endemic to the crypto industry, CoverCompared had to start with solid corporate fundamentals. These fundamentals include building a recognized brand, working with a world-class founding team, acquiring a robust user base. And complement it with an ever-improving insurance purchase experience made possible vs any traditional distribution model.

Cost - High Commissions

In the insurance industry, there are excessively high commissions that are paid to the middlemen or brokers, this causes the pricing of the products to be substantially higher than its actual risk price, we intend to reduce that by removing the high commissions that these intermediary are charging. As the number and type of internet-connected devices increases, insurers are able to gather and analyze the behavior, actions, and choices of their customers more accurately than ever before.

CoverCompared provides several tokenized incentives making up to 40% cheaper than any traditional insurance channel. We use the commission/incentives received from the insurance partners and discount it from the premium of the policy to build in the token adoption.

Seperately, our E2E API based setup reduces the manual transaction activity bringing down long term operational costs of running the platform.

CoverCompared is the first DeFi insurance marketplace for the global crypto ecosystem. We aim to give the power back to the people by lowering the transactional and administrative costs of Insurance policies and coverages, while providing high value with cost-effective insurance products for the crypto world.

Data, Statistics & Automation

A lack of insurance statistics in the cryptocurrency industry also presents problems of coverage pricing, as historical data is normally used to calculate premiums. In a volatile industry characterized by two-figure price swings, insurers can only manage to cover a small number of lost coins.

Most insurance is traded via third parties such as brokers and other intermediaries. This adds costs, time and complexity to the process. The insurance industry as whole has not yet adopted or embraced new technology to meet the demand of new products and the increasing concerns about data privacy. Increased competition and changes in consumer behavior are moving them in this direction. Insurance processes that manage risk, premiums and claims typically involve a significant exchange of data between multiple parties. Currently, the different parties would store their own copies of data, and process it individually. This makes it difficult to synchronize and collaborate through a shared process.

Decentralized Insurance Platforms on the blockchain can help to mitigate these problems. Blockchains are a form of distributed ledger technology that enables record keeping by a network of nodes rather than a trusted intermediary. Blockchain databases are highly transparent, tamper-proof and openly accessible.

A number of experts have already described this technology as the foundation of the world’s next-generation financial services infrastructure. The latest public blockchain systems such as Ethereum can run smart contracts. The latter are pieces of code that execute if-then-else instructions. Thus, they are well-suited for the development of a Decentralized Insurance Protocol (DIP), i.e., a digital mechanism that allows for the decomposition of the classical insurance value chain. Based on a DIP, insurance risks can be priced, transferred, and managed by a group of independent service providers without having to rely on a central intermediary or a traditional insurance company balance sheet.

User Adoption & Demographics

Presently, the crypto insurance options are mainly either too niche in their coverage or too complex to understand for mass market adoption.. This has resulted in a substandard experience for customer & policy management who are faced with a low penetration rate of adopting customers

CoverCompared will be uniquely positioned to bypass the traditionally long and expensive consumer acquisition journey by tapping directly into a consumer demographic which is willing to go above-and-beyond to contribute to the success of the business itself. Secondly, our strategy to convert a demographic unfamiliar with blockchain technology into loyal users represents a significant untapped opportunity.

Imagine you are a smallholder paddy field farmer. Your crops are vulnerable to natural disasters such as floods or droughts, even more so in the face of climate change. Since your entire existence depends on the integrity of your crops, you would like to have insurance in place that reimburses your losses in case your harvest gets destroyed. However, what if the insurance premium is unaffordable? What if coverage is not being offered, because your small premium cannot cover the costs of traditional insurance companies? What if it takes too long to receive a compensation payment after the loss event occurred?

In developed economies, these problems arise less frequently. In these places, insurance penetration tends to be high, monopolies are rare, and coverage for a wide range of perils is available. Furthermore, customers are protected by regulations and may have other assets that help them bridge the delay between the occurrence of the loss and the indemnification by their insurer. The situation is different in emerging economies, however, where the insurance sector is often not properly developed or regulated. This means that rent-seeking monopolistic enterprises can take advantage of the insured or, even worse, no insurance solution is available at all. When Hurricane Maria struck Puerto Rico in September 2017, for example, most citizens were uncovered. Of those that had insurance, 11,000 were still waiting for their claims to be settled more than one year after the event.

Game Theory & Economic Incentives

Decentralized insurance relies on a high degree of automation, e.g., in sales and underwriting and therefore makes policies affordable, even for very low sums insured. In addition, parametric triggers based on physical variables such as rainfall or wind speed ensure a rapid payout of claims: it usually takes one day instead of several months to reimburse the customers. The model ultimately becomes viable, since tail risk, such as an accumulation of claims due to a large-scale natural disaster, can be tokenized and transferred to the capital markets.

Evidently, this new institutional arrangement of the “decentralized insurance organization” may provide many benefits for customers. However, a number of critical problems have to be solved before practical implementation becomes feasible. One of the most pressing questions is the incentivization of “workers” in the decentralized setting, that is, those individuals or entities that are responsible for the production of the product or service. Since decentralized insurance works on a pure transactional basis, classical economic incentivization through hierarchies and managerial oversight cannot be applied.