Pricing
Last updated
Last updated
To determine how much this insurance policy should cost, we are using data collected by the Thesis & Dysmorphia NFT project, which shows how much users lost because of rug pulls:
As an example, we can see that 67 users and five founders lost between 1,000 and 2,500 ADA following such an incident.
From here, we can establish a range of their potential losses. In the best-case scenario — assuming all 72 lost 1,000 ADA — this would be a total of 72,000 ADA. But in the worst-case scenario, if each lost 2,500 ADA, this would rise to 180,000 ADA.
Let's now apply this concept across to all other bands:
We can now update this spreadsheet to include losses beyond rug pulls — giving us a risk portfolio representative of a decent sample:
The pricing of insurance policies will change following each loss and policy renewal — meaning premiums will be dynamic. To begin with, royalties will be controlled manually.
Pricing will initially be reactive to insurance claims. But based on our terms and conditions, we believe that a 30-to-1 ratio would create a sustainable ecosystem within Cardano.
In the world of cyber insurance, rates can range 100-to-1 (1%) to 10,000-to-1 (0.01%). This often depends on risk (such as whether there have been losses) and the terms of a policy (including limits, deductibles and the types of losses covered). Risk can refer to the policyholder themselves, as well as the asset being insured, such as a car.
Our pilot product is crucial for price discovery — and a 30-to-1 ratio means that, for every 1 ADA collected, we will be able to offer up to 30 ADA in coverage for one year in aggregate. Our policy has tiers representing various limits, and shares of risk/loss.
For example, owners of Legends will have a coverage limit of 3,000 ADA. Because the price of a Legend is about 1,000 ADA, the buyer will perceive this as a 3-to-1 ratio. But with royalties set at 30% — equating to 300 ADA — it effectively begins a 10-to-1 ratio.
For holders of Commons, priced at 20 ADA, the offered limit is 500 ADA. With royalties set at 30%, we earn approximately 6 ADA, resulting in an 80-to-1 pricing ratio. However we shall set the royalties at 50% to be safe and a good starting point which is the middle. It will either go up from here if we have too much losses or down if it performs well.
Our pricing curve is tiered, and will continue to be refined over time. As we move forward, pricing will also become more technical rather than reactive, and based on these factors:
Exposure: We will identify the total exposed, insured capital for each policyholder. Digital identity will play a part in identifying this exposure. This includes the sums insured, assets in their wallet, and approved assets.
Claims history: If a policyholder hasn't experienced a loss, they will be eligible for a discount.
Awareness levels: Policyholders with a thorough understanding of the latest malware and phishing attacks, and other risks, will be eligible for a discount.
Risk controls: Premiums will be informed by whether policyholders practice suitable crypto and cyber hygiene.
Risk ratings: By combining awareness levels and risk controls, a bespoke risk rating can be established for each policyholder.
