Parametric Risk-coverage Payout Automation via Distributed Ledger
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Solution Overview
Problem
Traditional insurance and parametric risk-coverage systems face inefficiencies in administering policies, particularly for hard-to-insure risks, lacking automation, immutability, and social incentives, and fail to substantially automate payouts and token-based compensation for consumers and node operators.
Innovation Solution
A system utilizing machine learning and distributed ledger technology to evaluate, manage, and automate parametric risk-coverage policies, including data storage on a blockchain for policy administration, smart contracts for automatic payouts, and incentivization tokens for social incentives and profit sharing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If traditional insurance administration methods are used, then human operation and administration are required, but efficiency is reduced and costs increase
Solution Approach 1:
The system enables self-service through smart contracts that automatically execute payouts when predefined conditions are met. The distributed ledger automatically records and verifies claims, eliminating the need for manual insurance administration. Policyholders can submit claims that are automatically processed and paid out based on objective criteria stored on the blockchain, achieving both high automation and efficiency.
Solution Approach 2:
The patent replaces manual mechanical insurance administration processes with automated digital systems. Traditional paper-based claims processing and manual verification are substituted with blockchain-based automated verification and smart contract execution, dramatically improving productivity while increasing automation extent.
2Reliability
If parametric risk-coverage policies are implemented, then automated payouts can be provided, but lack of immutable and authenticated platform limits reliability
Solution Approach 1:
The distributed ledger acts as an intermediary platform that provides immutability and authentication for parametric insurance policies. Smart contracts serve as intermediaries between policyholders and insurers, automatically enforcing policy terms and triggering payouts when conditions are met. This intermediary blockchain infrastructure enhances reliability without requiring complex manual verification processes.
Solution Approach 2:
The distributed ledger platform serves multiple functions simultaneously: it stores policy terms immutably, verifies claims objectively, executes payouts automatically, and provides audit trails. This multi-functional platform approach consolidates what would otherwise require separate complex systems, improving reliability while managing complexity through integration.
3Adaptability or versatility
If digital tokens are used for compensation, then social incentives and node operator compensation are enabled, but system complexity increases
Solution Approach 1:
The patent merges multiple incentive mechanisms into a unified token system on the distributed ledger. The same digital tokens are used both to compensate node operators for securing the network and to provide social incentives to policyholders for positive behaviors. This consolidation achieves versatile adaptability while managing complexity through a single integrated token economy rather than separate incentive systems.
Data Source
AI summary
An evaluation and payout of parametric risk-coverage for hard-to-insure risks using a distributed ledger system is provided for evaluating, administering, and paying out claims relating to parametric risk-coverage using a distributed ledger to reduce and/or eliminate human operation and/or administration. A system to facilitate evaluation and payout of parametric risk-coverage for hard-to-insure risks using a distributed ledger may include a policy recommendation component, machine learning model, data verification and token generation component, distributed ledger, self-executing contract execution engine, payout component, incentivization token aspect, marketplace component, and social incentive component. A method for evaluating, administering, and paying out claims relating to parametric risk-coverage using a distributed ledger to reduce and/or eliminate human operation and/or administration using the evaluation and payout of parametric risk-coverage for hard-to-insure risks using a distributed ledger system is also provided.