Silicon Valley-based Omni Fund released the world’s first blockchain platform for decentralized peer to peer insurance funds. Omni uses a blockchain technology called “smart contract” to replace human-run insurance companies as the trusted fund holder, reducing the cost of operations by several orders of magnitude. The savings in operational cost is then passed on to customers in the form of significantly lower premiums.
Omni Fund’s co-founder Zack Peng said that insurance premiums are high because insurance companies spend a fortune on operations, which are paid for by consumers.
In contrast, smart contracts can perform almost all of an insurance company’s functions on a negligible amount of transaction fees. Smart contracts are special software that runs on the Ethereum blockchain. Assets are securely stored in smart contracts by cryptographic locks that have a billion more combinations than the number of stars in the universe, and managed autonomously by the smart contract’s codes that are publicly auditable and guaranteed to always execute by mathematics.
By eliminating the high cost of operations, Omni not only allows customers to pay lower premiums for the same coverage but also brings risk prevention solutions to verticals inaccessible to insurance companies. Zack explained that:
Omni calls the risk-hedging pools created on its platforms “community fund,” because they are decentralized and community-based. Zack says that Omni Fund is not an insurance company and does not profit from excess premiums, but instead charges a small flat fee for transactions on the smart contract.
Omni Fund also appears to be the first DApp (decentralized application) platform that lets users directly spend U.S dollars. Usually, DApps require users to purchase their native cryptocurrencies in advance, which can be extremely volatile and is a significant hurdle to mass adoption. To address this issue, Omni Fund partnered with fully regulated U.S. exchanges to support USD payments, so premiums and payouts are always constant regardless of the price of tokens.
Omni Fund also developed other features that enhance the user experience. For instance, users can verify their identity by uploading a photo of their driver license that’s then analyzed by computer vision algorithm. Post-collision claims can also be made directly on the user’s phone through a combination of GPS location and encrypted live stream videos, shot from Omni Fund’s claim page.