A wave has stirred in the insurance ecosystem which has the potential to cause a tsunami of change. Decentralized, peer-to-peer (P2P) insurance has arrived.
Tides is a distributed network of P2P insurance, through which all the functions of an insurance company are decentralized. Tides’ networks place risks and premiums together into completely transparent pools. Premiums are priced by a network of actuaries voting through Tides’ consensus protocol, and claims are verified and paid via a decentralized network of oracles.
The network is initially tackling health insurance, which Tides founder and CEO Chandra Duggirala described as “completely broken”. He said: “In health insurance, there are three key problems: adverse selection, information asymmetry and incentive misalignment.
“Insurance companies are incentivized to maximize their revenue by raising premiums and minimize expenses by not paying claims. They also tend to construct policies that are difficult for most consumers to understand and they sometimes obscure information to keep consumers in the dark. All of this misalignment can be solved by the distributed, decentralized route we’ve taken.”
Tides’ value proposition is that instead of an organization or employer paying out huge sums of money to insurers or third-party administrators to establish a health plan, they can invoke a Tides pool, submit data to a Tides actuary, get premiums priced, and create a smart contract within a few clicks. Tides protocols are the same for each pool, but the employer or pool organizer has the ability to set additional rules to their specific pool.
In traditional insurance models, employers typically don’t have any say over what is done with excess premiums paid into the healthcare plan. With Tides P2P insurance, unspent premiums are treated as savings and are either rolled over into future coverage or returned to the employer. This enables employees to be “judicious of how they spend their money with the health program,” according to Tides founder and COO, George Burke.
This type of decentralized P2P insurance network paints a whole new picture for insurance carriers and brokers. Tides recently announced its first partnership with parametric health insurance provider, RainShine, whereby RainShine will administer a Tide pool of gig economy workers. By taking on the function of administrator, RainShine will get an allocated share of the insurance premiums.
“The Tides system is designed to reward people who pump more demand and services into the network. Those who do more of the work will get more of the rewards. There is no arbitrariness allowed, and all rules are followed by the employer, the insurer and the consumer,” Duggirala explained. “In the future, additional roles will become available. For example, the insurance broker could become a pool administrator. Even though their role as a conduit of information will disappear, the broker will have a new administrative role where they will eventually be able to make more money if they drive lots of demand into Tides.”
