2019 Predictions: Smart contracts will take off in insurance
As we mark the ten year anniversary of Bitcoin’s launch, there’s no shortage of news and speculation related to the digital currency’s value and potential applications. Articles related to blockchain overwhelming concentrate on an infrastructure underpinning digital currencies used for speculative investments. The reality is far more complex. Blockchain technology’s potential application could disrupt vertical industries as diverse as entertainment, agriculture, and logistics.
As distributed ledger technology (DLT), blockchains are able to reduce human error, costs and processing of data throughout entire supply chains. They also enable synchronisation and reconciliation of databases between various players in a value chain, by increasing efficiency and transparency. These qualities are particularly relevant for the insurance industry, where claims require details to be checked and verified by separate parties.
Although blockchain will not inherently change the insurance industry’s business model, it does reduce points of friction between stakeholders while enabling transparency and scalability. In particular the use of smart contracts (self-executing pieces of code) sitting on an immutable transparent and auditable shared ledger could have a significant impact on insurance processes.
In practical terms, this dramatically changes the risk transparency between contracted parties, improving the ability to calculate risk through verifiable sources, that can be checked in real time.
We see enormous opportunities for this technology, and as we enter 2019, the growing awareness of how blockchain can be applied to reduce supply chain frictions in ossified business structures is one of our main predictions for the new year. The use of smart contract technology transforms industries that continue to log information manually.