Blockchain & Insurance: Vetting a Billion-Dollar Idea

TL;DR

Parametric insurance + blockchain = a massive startup opportunity. Near-instant, transparent claim payouts could disrupt niche markets like maritime shipping and event cancellation. #VentureStep #Insurtech #Blockchain

INTRODUCTION

Finding a genuinely viable startup idea is one of the greatest challenges for any founder. To tackle this, many turn to proven frameworks like the one offered in Y Combinator's Startup School program, which provides a "recipe" for evaluating the potential of a new venture. ¹¹¹ This structured approach helps entrepreneurs move from abstract concepts to concrete, defensible business opportunities.

In this episode of Venture Step, host Dalton Anderson applies the Y Combinator framework to his own areas of expertise: data and insurance. ² He identifies a fascinating and underexplored niche at the intersection of old-world risk management and cutting-edge technology. The focus? Parametric insurance, a model that pays out based on predefined, verifiable metrics rather than lengthy, subjective damage assessments. ³³³

Dalton dives deep into how emerging technologies like blockchain, smart contracts, and high-throughput crypto platforms like Solana and Avalanche could solve the final hurdles for parametric insurance, enabling instant, automated, and transparent payouts. ⁴⁴He analyzes several potential markets, ultimately zeroing in on two compelling ideas: insuring against maritime shipping delays and event cancellations. ⁵

KEY TAKEAWAYS

• Traditional insurance is often slow and confusing for customers, with claim payments taking weeks or months. ⁶Parametric insurance simplifies this by paying a set amount when a specific, pre-agreed metric—like rainfall exceeding two inches—is met. ⁷
• Combining parametric insurance with blockchain and smart contracts can automate the entire claim process, enabling payouts to be processed in minutes instead of days. ⁸⁸
• While natural disaster and agriculture markets for parametric insurance are established, massive opportunities exist in underserved niches like maritime shipping delays and event cancellations. ^9999999
• High-throughput blockchains are essential for this model. Solana stands out as a strong candidate due to its focus on transaction speed and a model designed for high-volume usage, unlike value-focused coins. ^10101010
• Tools like Chainlink are critical, acting as the bridge that feeds real-world data (like weather or shipping locations) securely to the blockchain to trigger the smart contracts. ¹¹

FULL CONVERSATION

Dalton: Welcome to Venture Step Podcasts, where we discuss entrepreneurship, industry trends, and the occasional book review. ¹²In this episode, I'm going to be following up on my previous episode called SUS Learnings. ¹³

What is Y Combinator's Startup School?

Dalton: SUS Learnings, if you're not familiar, is the Startup School, a program offered by Y Combinator. ¹⁴I would suggest that you go back to that original SUS Learnings episode since it's going to be a series. ¹⁵You can apply, it's free. ¹⁶In a general sense, it's a course on how to make a startup. ¹⁷The first section I've completed so far is about why you should or should not start a startup, who it's for, and the pros and cons of the venture. ¹⁸

Dalton: The next thing is, how do you know you have a good idea? ¹⁹ Or how do you understand or value an idea? In that episode, I talked about a seven-step idea recipe they discussed. ²⁰If you can meet quite a few of those steps, you probably have a pretty good idea. ²¹So in this episode, I used the idea recipe to find an idea space and some opportunities for me to potentially pursue. ²²For myself, I've got experience in data and insurance, and that is a good space for me. ²³

Traditional vs. Parametric Insurance: What's the Difference?

Dalton: In this episode, we're going to be discussing parametric insurance, which is a little bit different than traditional insurance. ²⁴With traditional insurance, you file a claim. ²⁵If you have a homeowner's policy, somebody comes out and looks at the home, determines the loss amount, goes through their claim system, writes up notes, and files everything. ²⁶By the time that all happens, it could be weeks or, if it's a very complex claim, it might take months. ²⁷You could wait 30-plus days to get paid. ²⁸

Dalton: Whereas parametric insurance is different. You have a pre-agreed upon metric. 29Say you're hosting a sporting event and if it rains over two inches, you will have a loss of revenue because fewer people will go. 30You could get parametric coverage on that and say, "Okay, when there's two inches or more of rain in one single day during my event in my specified area, then I'll get money." 31With parametric insurance, you might still have to file losses, or it's sometimes set up automatically with an API, but it's still manually underwritten. 32From there, the payment is processed, so you're still waiting two to seven days, which is substantially faster than traditional insurance. 33

How New Technology Can Revolutionize Payouts

Dalton: But now we have an emergence of technology that allows payments to be processed much faster, able to verify the claims that the insured is making all within minutes, not days or weeks. ³⁴Traditional insurance has its space, but there's also space for parametric insurance to work. ³⁵And that's something that's pretty interesting to me. ³⁶

Real-World Examples: From African Farms to California Earthquakes

Dalton: Parametric insurance is not necessarily untapped, but it is untapped in certain areas. ³⁷California has a pretty good parametric program for earthquakes. ³⁸And there's some pretty cool stuff with blockchain and smart contracts in Africa related to crop yields. ³⁹If crop yields aren't meeting a certain amount because of rain, it protects farmers. ⁴⁰⁴⁰The majority of farmers in Africa are farming to feed their family, and if they don't get a good crop yield, they run the risk of malnutrition. ^41414141

Basically, that's the only application that I could find that utilized this new technology that enables the execution of parametric insurance to be near-instant versus waiting a week or so. ⁴²

Why Hasn't This Been Done Before?

Dalton: I thought that was pretty interesting that people haven't caught on yet. In insurance, we know that blockchain and smart contracts would be great for insurance in certain applications, but we haven't seen any actual real-world attempts at this, besides the example in Africa. ⁴³

I think that's a process or a factor of people working in insurance not being that technical; the exciting new shiny things are not insurance. ⁴⁴

Dalton: That would be rocketry or social media or AI algorithms. ⁴⁵The folks that could do smart contracts and this other stuff—it's not that complicated. ⁴⁶I say that when I don't know how to do it, but on a general sense, the logistics of it don't seem that bad. ⁴⁷ It hasn't been done. And the efficiency gains you would get are immense, both from customer satisfaction and from being able to process these things without the administrative burden. ⁴⁸

The Core Benefits: Simplicity and Speed

Dalton: The benefit of parametric insurance is it's a predefined metric. If that metric is achieved, then money is paid. ⁴⁹If it's not obtained, money is not paid. ⁵⁰ It makes it very clear to the insured. I hear all the time that people are getting very confused about what is paid and what's not. ⁵¹

A big thing that happens in Florida, unfortunately, is that people get insurance and then they realize that their insurance policy doesn't cover flood, and then their house floods. ⁵²

Dalton: That's an issue with the policy document and the agent educating their insured. ⁵³But I use that as an example to state that the insured normally doesn't know what's in the contract. ⁵⁴It's not necessarily clear what's getting paid. ⁵⁵ No one's reading these things. They're like 100 pages with a whole bunch of legal jargon. ⁵⁶

Either it rains two inches and you get paid, or it doesn't and you don't get paid. ⁵⁷ That's it. It's very simple. ⁵⁸

Dalton: The simplicity and the speed of payment, I think, would be a welcomed addition to the insurance world. ⁵⁹

Understanding the Challenges of Parametric Insurance

Dalton: But there are challenges. You could have a loss occur, but no money will be paid out because it didn't meet the metrics. ⁶⁰ Or, the clause is hit, but you may or may not have losses. For example, two inches of rain falls at your house. ^61616161It shouldn't damage your home, but money will be paid out, although it didn't cause you any material damage. ⁶²There's also the issue that your actual loss might not be the same as what was paid out. ⁶³Parametric insurance would also be something that would come over the top for the most part; you're not going to get full coverage because the money is only paid out when the metrics are achieved. ⁶⁴

Brainstorming Startup Ideas with AI

Dalton: The next thing I want to talk about is the ideas that I came up with. I used AI to help me research this because it would have taken too long. I read over a hundred pages of research about these topics. ⁶⁵We have natural disasters, which I think is pretty well played out. ⁶⁶There are quite a few people in natural disaster for parametric insurance, so I think it's too established. ⁶⁷With agriculture, it would be a tough one because you're dealing with smaller farmers, probably outside of the US, and I don't see that there would be much premium involved. ^68686868

Idea #1: Supply Chain Disruption

Dalton: Business continuity is interesting, particularly supply chain management and disruption. ⁶⁹Supply chain disruption is apparently an $18 billion market with a calculated annual growth rate of 6.6% to 2033. ⁷⁰I've given it a high feasibility because of AI's tracking, the amount of governmental data related to shipping routes, and real-time tracking of shipments. ⁷¹

Idea #2: Cybersecurity Breach Management

Dalton: Cybersecurity breach and management is about a $15.86 billion market right now, with a calculated annual growth rate of 19.52% up to 2033. ⁷²The issue with cyber is that you need to do penetration testing and be integrated into their systems. ⁷³It just seems like a difficult way to run parametrics. ⁷⁴One thing you could do is have parametric insurance trigger if stuff appeared on the dark web, but that was probably the best I could get off of cyber. ⁷⁵

Idea #3: Clean Energy Production

Dalton: Energy production insurance is an $18 billion market for clean energy, with a calculated annualized growth rate of 4.14%. ⁷⁶This is insurance for a solar farm or a wind farm. ⁷⁷If the wind suddenly changes pace and you don't have production for a couple of days, this policy would help you obtain the capital to purchase additional energy. ^78787878The issues are risk aggregation, since these farms are often in a concentrated area, and it's also quite competitive. ^79797979

Idea #4: Event Cancellation

Dalton: Of those four ideas, the two best were event cancellation and supply chain disruption. ⁸⁰Event cancellation is a $1.6 billion market and has a 6% calculated annual growth rate up to 2032. ⁸¹ It's interesting because you could target weddings. There are two million weddings a year. ⁸²The average cost of a wedding is $30,000, so people probably want protection. ^83838383If 10% of weddings per year wanted event cancellation insurance at $500 a policy, that's $103 million. ⁸⁴That's a lot of money, and that's not counting concerts. ⁸⁵

The Top Two Contenders: Shipping vs. Events

Dalton: To my knowledge, event cancellation insurance is offered, but it's not based on smart contracts, it's not parametric, and the limits are not too good. ⁸⁶I think there is something there that could be attacked. ⁸⁷Then with maritime shipping delays, apparently an absurd amount of shipments are delayed, something like 56.3%. ⁸⁸Until recently, there wasn't any coverage related to the delay of a ship arrival. ⁸⁹

Why Current Shipping Insurance Falls Short

Dalton: I looked at a couple of competitors, and it seems the max coverage offered is around $250,000. ⁹⁰But the average value for a shipment container is $1.1 million. ⁹¹So they're covering about 10% of the actual risk. ⁹²They're using parametric insurance, but not smart contracts or blockchain. ⁹³Their payments are a manual process and take anywhere from two to seven days. ⁹⁴

There's no reason why that couldn't be a close to instant payment. ⁹⁵Literally, all of the ships are tracked, the containers are tracked. ⁹⁶Everything is real-time. ⁹⁷

Dalton: I was looking at a free dashboard, shiptracker.org or something, and it was tracking 250,000 ships all at once. ⁹⁸I could see exactly where they were. ⁹⁹ For me, there is no feasible reason why you couldn't have this. The lack of coverage is probably because the frequency is so high, and they're nervous about offering more. ¹⁰⁰So those are the two ideas: event cancellation and maritime shipment delays. ¹⁰¹

Choosing the Right Tech: Solana vs. Avalanche

Dalton: So let's talk about blockchain. ¹⁰²There were two big frameworks I was intrigued about: Solana and Avalanche, both of which are building off the foundation of Ethereum. ¹⁰³The difference is Solana was built from scratch, from the ground up, with the idea to be a high-frequency transactional coin. ^104104104104The coin is inflationary to keep prices low and encourage use. ^105105105105It uses proof of history and proof of stake to verify transactions. ¹⁰⁶They've had demos of up to 880,000 transactions a second, while Visa has a throughput around 40,000. ¹⁰⁷¹⁰⁷

Dalton: Avalanche is also really cool. ¹⁰⁸It has a lower throughput, around 4,400 transactions a second. ¹⁰⁹It's a fork of Ethereum, so it's an improved version, but it still has some of the issues Ethereum had. ^110110110110The issue for me is scalability, and their coin is deflationary, meaning it gains value over time and coins are limited. ^111111111111They announced they're going to do 720 million coins, and about 60% are owned by founders or investors. ^112112112112

In my mind, one group is trying to be one of the best high-throughput transactional protocols in the world... and the other is trying to pitch a value proposition. ¹¹³For the sense of low fees and long-term stability, Solana I think is better. ¹¹⁴

What is Chainlink and Why Is It Essential?

Dalton: There's one more, it's called Chainlink, which I think is incredible. ¹¹⁵After doing this research, I'll have to use Chainlink if I want to do parametrics. ¹¹⁶Chainlink is the bridge between the blockchain, smart contracts, and real-world activities. ¹¹⁷Whether it's weather data, government data, any type of Oracle data source, Chainlink is the chain that links both the real-time updates of data to these blockchains. ¹¹⁸You could pull data from Chainlink into your smart contract, either on Avalanche or Solana. ¹¹⁹

The Final Choice and Next Steps

Dalton: My selection is Solana at the moment. It's pretty firm. ¹²⁰No matter what option I pick for the idea, Solana would be the one I would choose. ¹²¹So the next thing is to find out all the competitors and the legality of each idea. ¹²²And then keep pursuing a co-founder and start building. ¹²³

Why Build with the Go Programming Language?

Dalton: I think I'll build in Go simply because it would allow us to possibly outsource some of our development work. ¹²⁴The reason is that Go is very strict. ¹²⁵ In one programming language, you might have 12 ways to do something. In Go, there might be two. ¹²⁶It's very simple and doesn't allow much expression. ¹²⁷Go was built for massive companies like Google, its creator, to prevent engineers from going off the rails. ¹²⁸

Go is brutalism of programming language. ¹²⁹

Dalton: That's why I would select Go. ¹³⁰Once I get a fully fleshed-out idea, then I'll probably shoot my shot and apply to some incubators. ¹³¹We'll see how it goes, but I'd love to find a co-founder. ¹³²Wherever you are in this world, good afternoon, good morning, good evening. ¹³³I hope that you enjoyed listening to today's episode and I hope you listen in next week. ^134134134134

RESOURCES MENTIONED

• Y Combinator
• Startup School
• Marsh Insurance ¹³⁵
• shiptracker.org (or similar service) ¹³⁶
• Mega Projects (YouTube channel) ¹³⁷
• Solana ¹³⁸
• Avalanche ¹³⁹
• Ethereum ¹⁴⁰
• Bitcoin ¹⁴¹
• Chainlink ¹⁴²
• Fire Dancer ¹⁴³
• Visa ¹⁴⁴
• Go (programming language) ¹⁴⁵
• Google ¹⁴⁶

INDEX OF CONCEPTS

AI, Agriculture Insurance, API, Avalanche, Bitcoin, Blockchain, Business Continuity, Chainlink, Cybersecurity Insurance, Dalton Anderson, Energy Production Insurance, Ethereum, Event Cancellation Insurance, Fire Dancer, Florida, Go, Google, Insurtech, Marsh Insurance, Mega Projects, Parametric Insurance, Proof of History, Proof of Stake, Proof of Work, Rust, Smart Contracts, Solana, Startup School, Supply Chain Disruption, SUS Learnings, Visa, Y Combinator