TandaPay and Peer-to-Peer Insurance
Five years ago, I wrote an article entitled “Cryptoinsurance,” describing the possibility of a peer-to-peer insurance system implemented through cryptocurrency. I have recently found out about a company called TandaPay, which is seeking to implement a version of decentralized cryptoinsurance and was awarded its first patent last month.
TandaPay’s vision of how cryptoinsurance might work is fairly simple (but is explained in more detail by founder Joshua Davis here). Individuals may choose to join a mutual insurance group, containing others they know and trust, by monthly contributing funds in the form of cryptocurrency. If a member of the group makes a claim, a designated secretary determines whether it is valid, and members of the group are then supposed to allow their funds to be released to the claimant. However, any member of the group may choose to refuse to release their funds, in which case that member is banned from further participation in the group. If claims fall short of contributions in any month, then the difference is refunded. If, on the other hand, claims exceed contributions, then the contributions are divided to claimants in proportion to approved claims.
One interesting aspect of this arrangement is the principle that all premiums are distributed to policyholders every period, either in the form of claims or as refunds when there is money left over. Nothing in this principle is dependent on the crypto-aspects of the broader proposal, and indeed Davis of has argued (see here, half way down) that full distribution of premiums might help overcome some diff
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