Claims processes

When you get hacked in the DeFi space, the most important thing for users is a fair claims process, which is simple and can be resolved quickly. These users want their refunds fast, so they don’t miss the next investment opportunity. Overall, a transparent and democratic process is required to ensure that the right incentives are involved and that fraudulent parties are unable to manipulate the process.

Each claims assessment process is different and each risk provider has a different voting process. This article breaks down how Nexus Mutual, Bridge Mutual and InsurAce manage claims and make community driven decisions.

Comparison of Insurance protocols

The community stakes their funds in insurance risk pools. Since the staked money is used to pay out claims in the event of hacks or losses, the governance over these funds must be very robust. Legitimate claims need to be paid out fast, and illegitimate payouts need to be avoided. The below table summarizes the different approaches of each platform: Nexus Mutual was the first to market introducing a robust community voting approach. Bridge Mutual followed with a similar approach but allows the user to appeal if they disagree with the voting of the claims assessors. InsurAce has a similar process combined with a very rigid research and recommendation from their experts.

	Nexus Mutual	Bridge Mutual	InsurAce
Claim needs to be made in how many days?	Up to 35 days after the cover period has ended	Up to 14 days after the cover period has ended	p to 15 days after the cover period has ended
Risk platform organizes expert advice	Yes	No	Yes
Voting (accept/reject claim)	Community members who choose to put tokens at stake	Community members who choose to put tokens at stake	Community members who choose to put tokens at stake
Appeal process in place	Users cannot appeal	Members can appeal	Members are allowed to appeal for 24 hours
Theoretical maximum duration of the process	Over 30 days	3-step voting process within 6 weeks	t.b.d.

As the industry is relatively novel, limited claims have been paid out yet. At the time of writing, Nexus Mutual has paid over $5M in claims, while newer coverage providers like Bridge Mutual and InsurAce still have to gain experience in this respect. To Bright Union's knowledge, there have not been any contested claims or users who feel the risk platforms have duped them. We realize that all parties are still learning how to optimize the claims process. Research shows that cover buyers are very skeptical about the decentralized claims process, which would benefit the entire industry.

At Bright Union, we believe that further improvements of the decentralized claims approval process will eventually be a key advantage for decentralized insurance over traditional insurance. We believe that centralized claims approval will always be necessary for use-cases where an expert is needed to establish the size of a claim (a broken car or telephone, a medical bill, or a burned-down house). However, claim reviews in such cases can be done based on reliable on-chain data enabled by Oracles. This will make decentralized insurance more fair, efficient, and transparent.