Self-Executing Agreement for Premiums Escrow Management
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Solution Overview
Problem
Current systems lack an efficient mechanism for creating a secure, publicly-available, and non-repudiable record of incidents and financial transactions within groups, particularly for insurance-like scenarios where trust and validity of claims are crucial, often relying on third parties for escrow management.
Innovation Solution
A computer-implemented method using a distributed ledger and self-executing agreements to manage a premiums escrow, where cryptocurrency premium payments are allocated, incident claims are processed, and rebate payments are distributed, ensuring a tamper-proof and transparent record of transactions.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If a distributed ledger and self-executing agreement are used to manage premiums escrow, then security and transparency of financial records are improved, but device complexity increases
Solution Approach 1:
A third-party escrow management system is introduced as an intermediary to handle the complex distributed ledger operations. This system receives premium payments from policyholders, manages the escrow account, processes incident claims, and distributes rebate payments, thereby shielding end-users from the underlying system complexity while maintaining security and transparency through blockchain technology
Solution Approach 2:
The self-executing agreement (smart contract) automatically performs escrow management functions without requiring constant human intervention. The system automatically receives premium payments, allocates funds to the escrow account, processes incident claims when conditions are met, and distributes rebate payments to policyholders, reducing operational complexity through automation
2Ease of operation
If third parties are used for escrow management, then ease of operation is improved, but loss of information and trust in the system increases
Solution Approach 1:
The patent introduces a distributed ledger as a neutral intermediary that creates an immutable, transparent record of all escrow transactions. This allows third-party escrow management to proceed smoothly while simultaneously providing verifiable, tamper-proof records that enhance trust. The blockchain ledger publicly records all premium payments, incident claims, and rebate distributions, eliminating information asymmetry between the escrow manager and participants
Solution Approach 2:
The distributed ledger provides real-time, transparent feedback to all participants about the state of the escrow account and transaction history. Policyholders can verify that their premium payments are recorded, track incident claims as they are processed, and confirm rebate payment distributions, creating a trustless system where transparency replaces the need for trust in the third-party manager
Data Source
AI summary
A computer-implemented method includes creating a premiums escrow, with a zero balance, for a group of policyholders and managed using a distributed ledger and self-executing agreement. At a term beginning, the self-executing agreement receives premium payments sing cryptocurrency from each policyholder and allocates the premium payments to the premiums escrow. During the term the self-executing agreement receives a notification of an incident claim associated with a claimant policyholders. At a term end, the self-executing agreement receives payment instructions from the policyholders; pays, using cryptocurrency from the premiums escrow, the claimant an incident claim payment larger than the premium payment and determined according to the payment instructions; and distributes to the policyholders a rebate payment equal to or lower than the premium payment from the premiums escrow, which returns to a zero balance. The self-executing agreement stores a record of the incident claim in a tamper-proof, publicly-available, non-repudiable distributed ledger.