A Look at Decentralized Insurance

According to Statista.com, the insurance industry in the US alone collected $1.36T in premiums in 2021. This has been increasing steadily for nearly a decade now and is a sizeable aspect of the financial markets. This begs the question: what is the DeFi alternative for insurance?

Before we look at some of the existing solutions, it is important to recognize that the insurance industry today is still highly reliant on manual processes for claims verification. This remains one of the greatest bottlenecks for decentralized insurance alternatives. Moreover, it should be highlighted that decentralized insurance is vastly different from insuring the crypto markets. The former refers to having a decentralized process of collecting premiums and paying out claims, whereas the latter refers to an entity collecting premiums to pay out when certain events occur, such as an exploit or de-pegging of stablecoins. These two concepts are not mutually exclusive, but it is crucial not to confuse them.