In a perfect world, all markets would reach equilibrium, but of course the world is not perfect.
In real markets, many factors create frictions that prevent the market from reaching equilibrium. Asymmetry of information is an extremely common obstacle; it is a phenomenon that occurs when there is a transaction or interaction between two parties, although one of them has a greater degree of information about the true value of the transaction or interaction. Due to asymmetric information, many markets can not function properly and the insurance industry is a prime example of this.
Auto insurance is a multi-billion dollar industry and is still facing critical inefficiencies due to asymmetric information. A consumer really knows whether or not he is a hard-working driver, but the insurance company has limited resources to verify a driver’s personality. Insurance companies tend to estimate the expected cost of an insurance policy by estimating the likelihood of a person committing an accident and the expected cost of the accident. Although it is possible to estimate the cost of most accidents, it is almost impossible to accurately predict which person is most likely to commit an accident before the person has set a running accident record, but it is already too late. An additional problem occurs when the person migrates since then, they have no record in the new country; Those who performed poorly and those who performed well were brought to the same cost level.
Blockchain projects use the transparency of blockchain technology to combat asymmetric information in different sectors. Now Essentia offers a viable solution for inefficiencies in the auto insurance market.
The advantage of Essentia
Essentia allows users to develop a seed that turns out to be a person’s dataset. Essentia integrates multiple platforms, services and platforms into a single platform, providing people with a convenient way to interact and manage their digital identity. Only the user has the crucial authority to know who can access which aspects of the data transmitted by a seed. This development can incredibly easily predict which person is least likely to cause an accident.
Insurance companies that need to issue insurance policies to newly arrived immigrants can apply for seed access and see which people in their former country had a bad history. Users are not bothered by the exchange of information while controlling what the insurance company can see and how long they can see it. Insurance companies get temporary access to data.
To ensure that people choose to offer seed data, insurance companies can offer lower premiums for those with a positive record. Given that everyone wants to save money and Essentia makes sure that no data is owned by the company, it is likely that the only ones who are unwilling to provide data their seeds are those who are likely to pay more ,
The situation has always been complicated because actuaries are trying to evaluate an insurance policy. However, a comparison of expected net revenues with net liability costs, which should ultimately result in an average overall market rate, is an inadequate approach to the conclusion of insurance policies.
Essentia, however, offers a solution. Because the platform enables users to fully manage their digital presence from one location, it offers the user the ability to give the insurance company a complete overview of their behavior. Temporarily understanding data and the identification of users as a social network user is unwise, commercially and in terms of their economy and their entire digital presence. By accessing, companies can accurately predict which drivers will act recklessly the way.
Essentia paves the way for eliminating information asymmetry in one of the largest industries in the world. It provides an effective way of bad apples are good and appropriate to reward those who drive well to differentiate and punish (financially) those who drive recklessly. Good drivers no longer have to bear the cost of damage caused by careless drivers.