Author name: @nobumei (https://twitter.com/nobu_mei)
<aside> 💡 This page deals with DeFi insurance.
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While DEX and Lending are the current standard uses of DeFi, there is an applied use of DeFi: DeFi Insurance. In this section, we will introduce InsureDAO, a DeFi insurance protocol originating in Japan.
The size of the global insurance market, including both non-life and life insurance, is approximately 692 trillion yen. By country, the U.S. market is worth about 271 trillion yen, China about 68 trillion yen, and Japan about 51 trillion yen, making Japan the world's third largest. The automobile industry, one of Japan's key industries, has a market size of approximately 66 trillion yen, which suggests that this is a very large market.
Unlike Web 3.0, insurance is an industry that has been around for a long time and is rooted in the lives of the people. Because of its long history, there is a lot of unnecessary paperwork and duplication of efforts, and these are being DXed.
Technology-enabled insurance is called "InsureTech," and it has attracted a lot of attention due to the rush of IPOs of InsureTech startups in the U.S. in 2020.
Technologies adopted include RPA, no-code tools, and AI, of which blockchain-based DeFi insurance is one type.
DeFi insurance is not a common practice in the insurance industry, and is only one element of the Web 3.0 industry, but it is an area with high expectations in terms of its affinity with decentralized P2P insurance using blockchain and the efficiency of business operations, and we will introduce it in this section.
It is the insurance company that provides the insurance product. It is obvious.
Although the types of insurance offered include auto insurance, homeowners insurance, fire, earthquake, personal injury, and logistics, the only areas in which insurance is offered as a product are profitable financial products in which the company can expect to make a profit.
Recently, in addition to large amounts of money and high asset value, insurance products focusing on individuals, such as pets and smartphones, have been introduced, and the scope of insurance availability is expanding.
DeFi Insurance has the potential to offer this coverage in an even wider, more individual-focused way. And the key to this is the smart contract. By writing smart contracts, anyone can develop insurance products, not just insurance companies.
For example, it is possible to create an insurance that "pays out if it rains tomorrow".
This may have been an extreme example, but various DeFi insurance policies written in smart contracts are now available.
Insurance can be broadly divided into life insurance and non-life insurance, but at present DeFi Insurance mainly deals with "non-life" insurance. Property insurance is insurance that pays out in the event that "something happens ".
To simplify this structure a bit, when "if event A happens, do B," in a centralized joint stock company, the people in the company can execute B by observing event A and judging its truth or falsity, but in DeFi insurance, it is extremely difficult to prove that event A has occurred.