- How would you ensure there is no fraud?
- Who decides when & what amount is paid out?
- How do you verify a catastrophe occurred & is not just based on hearsay?
I'm with you on this as an idea but there is a lot of ?'s that come with dabbling in insurance & a lot of red tape.
Fraud is potential area that can be minimized via blockchain, by making data available on blockchain and using smart contracts from participants to stake the validity of claim and event. Also, using third party Oracles can help here to minimize the fraud risk.
The biggest risk factor is "cheating" the device and it's ability to send data to smart contract. This can be covered by filtering IPs and other ways to block scam/spam/cheating.
Who decides when & what amount is paid out? - Build of smart contract that governs insurance policy is done by Actuary and Insurance product managers.