# kaal:claim:4529715-034

**Claim.** 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.

**Type.** mechanism  **Support.** argued

**Holds when.**

- discretionary mutual where members decide claims

**Source quote.**

> 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.

**From.** Wulf A. Kaal, Josh Bykowski, *Decentralized Autonomous Organizations (DAO) – A Market Meta Analysis* (2023), Appendix, Decentralized Insurance, Nexus Mutual, page 90

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

**Verify.** sha256 of source PDF `2d71961e8c449afbeaf45ca4f53de8a575d45c77d6960b767d3d1d0874f296b5` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20and%20Bykowski%20-%202023%20-%20Decentralized%20Autonomous%20Organizations%20%28DAO%29%20%E2%80%93%20A%20Market%20Meta%20Analysis.pdf

**Topics.** decentralization, risk-and-incentives, reputation

**Keywords.** decentralized-insurance, incentive-design, claims-assessment, reputation, time-horizon

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