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Blockchain technology offers unique properties that can be used to create innovative decentralized insurance products that bring a number of benefits to both insurance providers and their customers. In this technical tutorial, we’ll show you:
- The main features of a decentralized parametric insurance contract
- Why Chainlink oracles play a pivotal role in these new insurance products
- The advantage of using Chainlink Price Feeds in decentralized insurance contracts.
- How to put everything together to create a working parametric crop insurance contract.
- How Chainlink nodes can be used to automate the updating of the insurance contract.
The complete code for the example below can be viewed in Remix or on GitHub and includes all the functions mentioned below as well as all the required helper functions.
Decentralized Insurance
Decentralized insurance involves using blockchain technology and smart contracts to replace traditional insurance agreements. There are three main features that stand out for a decentralized insurance product:
Data-Driven Automation
The most important aspect of decentralized insurance contracts is that they’re data-driven and self-executing. This means that the insurance contracts execute logic automatically without requiring human intervention, and rely on secure and accurate data obtained from external sources to determine the execution of the contract logic. These insurance smart contracts can also be connected to external outputs, such as payment processors or enterprise financial systems to facilitate payments to be triggered.
Smart Contract
The smart contract represents the insurance contract between the insurer and the customer, which is essentially a promise by the insurer to indemnify the client against specified types of loss, damage or liability, or in the case of parametric insurance, to hedge risk against a particular event occurring. It contains all the details of the insurance contract such as the index (for example rainfall in a crop insurance contract), client details for ...
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