The insurance DAO has a potential for greater accountability in how an insurance institution is governed. Human institutions governed by corporate charters may be subject to human error or coercion. Insurance DAOs are governed by smart contract code published on the blockchain. When this code is ran all computational steps, their results and their beneficiaries are published on a publicly auditable ledger. This means that the operations which pay or deny claims can be examined to see if any unfair result occurred.
The insurance DAO by its very nature has a higher degree of auditability. At any time anyone can determine accurately the complete history of a smart contracts financial accounts encompassing all spends and payments made to or from the DAO. This is possible because all transactions are recorded by all nodes on the Ethereum network which operate to maintain the blockchain ledger.
The insurance DAO has the potential of achieving greater efficiencies with less overhead. Many parts of the underwriting and claims process have the potential of being automated by smart contract code running on Ethereum. If something cannot be automated because of its complexity the DAO has the ability to create micro work tasks to leverage human intelligence. The existing pool of policy holders can help the DAO to perform underwriting and claims processing tasks far cheaper than if this was delegated to fulltime employees. Additionally the DAO may be able to use social networks and reputation systems as oracles for claims validation in ways which are far less costly that how claims are validated today.
The insurance DAO has the potential of eliminating dependence on trusted third parties in order to manage insurance funds. All insurance institutions today are exposed to counterparty risk. Existing institutions rely on complex audits to prove their solvency. The solvency of an insurance DAO can be ascertained instantly through the power of public ledgers. This allows for policy holders to better understand their potential risks.
In short Ethereum smart contract technology has the potential of minimizing insurance fraud at every level from corporate management of funds down to individual claims and it can do all of this with less costs due to less overhead required to maintain and operate the system. To discover how Dynamis intends to implement peer to peer insurance continue reading here.