Background
The Neptune Mutual DAO uses the parametric model (also known as index-based insurance) which is a new and innovative alternative to traditional insurance.
How Does a Parametric Coverage Work?
A parametric coverage protects policyholders against financial loss resulted by a set event (also known as cover incident). The policyholders pay a premium (also known as policy fee) to get coverage for a fixed duration and desired amount. Not only the parameters of any given cover pool can be independently verified but they are also transparent and consistent. There is no need for the users to submit proof of loss and loss adjusters to perform verification and/or assessment of claims. The claims payout is a quick and extremely easy process as it does not require case to case assessment as in Nexus Mutual.
The Neptune Mutual DAO also introduces a concept of mutual or collective ownership of liquidity pools where liquidity can be crowd-pooled to cover the policyholders from financial loss. The pool enables the LPs (liquidity providers) to profit from the policy fees paid by the users. The LPs can also benefit from other advantages as described in the following article:
In the traditional insurance industry, parametric model plays a significant role to protect policyholders from natural disasters. This model of coverage has gained a lot of traction because of the ease and rapidness of getting payouts because it does not require services of claims accessor for settlements.
Last modified 10d ago
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