A Peer-To-Peer (P2p) Agricultural Insurance Approach Based On Smart Contracts In Blockchain Ethereum

Abstract

Traditional agricultural insurance systems are mainly based on the relationship between two actors: (i) a farmer, who purchases a crop insurance policy in exchange for a premium paid before crop seeding, and (ii) an insurance company that provides compensation for crop damages caused by extreme weather events. Many crop insurance schemes are a mix of procedures, aiming at covering the weather risk by subsidizing (partially or totally) the insurance premium. Yet, the bureaucratic mechanisms designed to evaluate the damages related to the insured crops lead to complex procedures that result in significant delays in covering the damages and implicitly the disruption of the farms’ cash flow and production processes. The insurance system decentralization based on a P2P insurance system implemented on the basis of a framework supported by blockchain technologies dedicated to agricultural insurance through a smart contract system operated on the Ethereum platform can ensure, besides a less bureaucratic agricultural insurance system, a smoother payment to the farmer in a context of social economy that diminishes farmer's distrust of the risk coverage product. The paper is intended to design a technological solution based on the Ethereum blockchain that supports a financial product to cover the production risk through a structured framework on two levels: the analysis-decision level and the payment level.