kaal:claim:4529715-034

Short-term incentives in a decentralized insurance mutual would motivate decision-makers never to pay a claim in order to maximize current profit; incentivizing long-term alignment instead motivates them to pay genuine claims because of the value of the resulting reputation.

Short-term focus would motivate decision-makers to never pay out any claim to maximize current profit. However, incentivizing long-term alignment motivates decision-makers to pay out genuine claims because of the significant value of the resulting positive reputation.

Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023), Appendix, Decentralized Insurance, Nexus Mutual, p. 90
https://ssrn.com/abstract=4529715 · source PDF

Wulf A. Kaal, Josh Bykowski, Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis (2023). SSRN: https://ssrn.com/abstract=4529715

• discretionary mutual where members decide claims

mechanismsupport: argueddecentralizationrisk-and-incentivesreputation

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