Hello all,
I’m extremely excited to present our first contribution to the growth of Nexus Mutual.
I hope our experience at Native (Pool 28), a commercial insurance syndicate, offers a unique perspective on the proposed Delegated Claims Authority RFC. Our expertise spans both traditional insurance practices and DeFi, positioning us to bridge these sectors effectively.
We support the implementation of Delegated Claims Authority, recognising its potential to enhance Nexus Mutual’s service offering. This change aligns with the evolving needs of the insurance market, particularly for clients from traditional finance exploring decentralised solutions. The following sections outline the benefits, opportunities, and considerations of this proposal, informed by our experience in integrating established insurance processes with onchain cover.
Benefits of Delegated Claims Authority
Increased Consistency and Expert Assessment
By allowing for delegated claims authority, we can ensure a consistent and professional claims service across complex product types. This consistency is paramount in building trust with clients, especially those from traditional finance backgrounds who heavily rely on standardised insurance processes for certainty. With delegated authority, we can implement standardised assessment criteria and procedures, ensuring that each claim is evaluated with the same level of scrutiny and expertise, regardless of its complexity or the specific circumstances surrounding it.
This change enables claims to be assessed by highly qualified experts. In our case, we work with a number of third-party administrators (TPA) who are collectively the world leaders in digital asset insurance contracts, claims and law. Our TPAs bring years of experience in handling digital asset-related claims, understanding the intricacies of blockchain technology and the unique risks at the intersection between onchain & traditional businesses.
This level of specialised knowledge is crucial when dealing with complex, crypto-native insurance products. Their expertise extends beyond just technical knowledge – they also understand the regulatory landscape and best practices in risk management for digital assets. This depth in experience and capability ensures that claims are not only assessed accurately but also in compliance with relevant insurance regulations and industry standards.
Alignment with Traditional Insurance Processes
The proposed system brings Nexus Mutual closer to traditional insurance processes, which is vital for increasing confidence among large, established businesses considering crypto-native insurance solutions. Many potential clients from traditional sectors are hesitant to engage with alternative (typically unregulated) ‘insurance’ platforms due to a lack of credit rating and unfamiliarity with the claims process. By implementing a delegated claims authority system within Nexus’ capabilities, we’re taking a closer step to bridging DeFi and traditional insurance, a core goal of Native.
This alignment will significantly lower the hurdles for traditional businesses to purchase onchain cover, allowing them to rely on a claims process that feels familiar and trustworthy. It also opens up opportunities for Nexus Mutual to potentially collaborate with traditional insurance companies, creating hybrid products that leverage the strengths of both decentralised and traditional systems.
The Attributes of Claims Assessors
A key strength of this proposal is the ability to assign a trusted claims assessor at the time of binding coverage. This flexibility offers several advantages:
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Reduces ambiguity in the claims process: By clearly defining the assessor at the outset, all parties involved in the coverage agreement have a clear understanding of how potential claims will be handled. This transparency eliminates any confusion or disputes that might arise from an opaque or evolving assessment process. We can promote the designated assessor’s credentials and track record as part of the Nexus Mutual proposition, further boosting credibility in the coverage.
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Allows for tailored expertise based on the specific product type: Different insurance products often require different types of expertise for accurate claims assessment. For instance, an EVM smart contract vulnerability claim would benefit from an assessor with deep knowledge of Solidity and blockchain architecture, while a claim related to Bitcoin mining data-centres might require expertise in property, energy and ASIC mining operations.
The ability to assign specific assessors to different product types ensures that each claim is evaluated by the most qualified expert for that particular area, leading to more accurate, informed and fair assessments. -
Enhances trust and transparency for the cover buyer: Knowing who will be responsible for assessing potential claims provides an additional layer of assurance for the cover buyer. It allows them to factor in the reputation and expertise of the assessor when making their decision to purchase coverage. This transparency can be a significant selling point, especially for institutional clients who need to demonstrate due diligence within their own risk management processes. Note that claims assessors, much like underwriters and brokers, are only as good as their reputation for fairness and nuance; adding a renowned TPA to the process increases accountability and transparency to the entire process.
Overall Benefit to the Ecosystem
By seamlessly combining Nexus’ transparency with traditional insurance practices, the implementation of delegated claims authority represents a significant upgrade for the Mutual and the onchain risk ecosystem.
This hybrid approach maintains Nexus Mutual’s decentralised ethos while introducing necessary specialisation for complex, high-stakes claims. It naturally creates a potential tiered system where community assessment handles simpler claims, and specialised assessors manage more complex ones, ensuring efficient resource use and maintaining community involvement. Ultimately, this change positions Nexus Mutual to compete more effectively in the broader insurance market, opening doors to new partnerships, product types, and customer segments previously out of reach.
Preserving the Mutual’s Interests
We support the safeguards outlined by Hugh, including Advisory Board control over product types using delegated claims and the retention of the 24-hour cool-down period, maintaining the protocol’s resilience while enabling necessary flexibility.
Additionally, we would like to also include commentary on the confidential nature of commercial insurance claims. Our proposed change suggests that claims evidence available to traditional insurers and TPAs cannot be fully disclosed due to sensitive commercial information. This necessitates a level of trust in delegated claims assessors to act professionally, even without full transparency to the entire Mutual. To balance this, we propose that a defined group of Board members, with appropriate clearance, could review sensitive claims information on behalf of the Mutual. This approach preserves confidentiality, allows us to hybridise onchain cover with traditional insurance claims processes and maintains Mutual oversight.
We welcome further discussion on ensuring the security and accountability of delegated claims assessors, including processes for resolving potential disputes between assessors and the Advisory Board.