Blockchain seems to have the most potential in the oldest industries. The centuries-old practice of insuring against losses is no different. We compiled a list of 15 companies who are using blockchain technology to build a wide variety of innovative solutions in insurance. First, the table. Then we can get into why insurance is ripe for disruption through blockchain technology.
For more information on these projects, check our Blockdata profiles for Tierion, B3i, Insureum, VouchForMe, Everledger, Etherisc, FidentiaX, Teambrella, iChain, Rega, Poleecy, Halos, Nexus Mutual, Insurwave, and Addenda.
Looking into mainstream blockchain adoption shows that this technology can have the biggest impact on the most old-fashioned processes. As we have seen with trade finance and supply chain, a heavy reliance on paper-based documentation represents a massive opportunity to use blockchain — and insurance is no different.
Just like with supply chain, one of the primary ways in which blockchain improves processes for insurance is through smart contracts, programs that can automatically execute when given certain inputs. The inputs can be data that is already on the same blockchain or from an external source — something called an oracle.
An oracle is a trusted off-chain data source whose input is required to make a state change on the blockchain. A data point or event reported by an oracle could trigger an event on a smart contract on the blockchain. For example, if you are looking at an insurance policy that covers flight delays (a form of parametric insurance), the oracle could be a trusted data source which tracks flight records. If the flight does not take off within a specified time of its scheduled departure, the oracle could report this data to the blockchain, and a smart contract would be executed that results in a payout to the policyholder. As long as the oracle is trustworthy and the code in the smart contract is correctly written, we have a very efficient way of executing policies.
The use of a trusted oracle (or multiple oracles) reduces the risk of fraud. In our example above of a flight delay, if multiple trustworthy sources report that the flight departed on time, the insurance company can eliminate fraudulent or bogus claims made by a dishonest passenger. While fraud is still technically possible if the oracle can be compromised, the barrier to entry for this is much higher than simply forging a document or falsely reporting an event. German blockchain project Etherisc has already seen a blockchain-based flight delay insurance product launched on its protocol.
Besides parametric insurance and fraud detection and prevention, there are several other areas where blockchain can help improve processes:
General insurance, or property and casualty insurance as it’s known in the United States and Canada, is an umbrella term for many different types of insurance (excluding health and life insurance). These policies cover your possessions and property. They also provide liability coverage in the event that you are legally responsible for an accident that injures someone or causes damage to their property. Documentation that can be securely stored on a shared ledger greatly reduces the time necessary for the various parties to coordinate information.
Reinsurance is coverage that is provided for insurers themselves. It helps insurers to protect against catastrophic loss in the event of large payouts. Reinsurance allows insurers to not only transfer risk, but also to reduce the amount of capital needed to cover clients’ potential claims and profit from arbitrage. The use of smart contracts can streamline the exchange of information and automate payments between insurers and reinsurers. B3i, a consortium of major insurance industry players, is targeting the reinsurance market with the launch of its first product in early 2020, a product covering catastrophic loss for insurers in the event of natural disasters.
With patient privacy being of the utmost importance, health insurance providers can gain massive efficiencies by using distributed ledgers to securely share patient information with the relevant parties. This will help greatly cut down on processing time and reduce the stress of the notoriously complicated claims process. Early in 2019, a consortium of health companies and PNC Bank partnered with IBM to use blockchain to improve processes related to health insurance and data sharing. Chris Ward of PNC said that by using blockchain technology, “We can remove friction, duplication, and administrative costs that continue to plague the industry.”
Where can I learn more?
If you’re interested in learning more about the specific companies in our list and how they are using blockchain technology, please get in touch with us. Our dataset covers over 400 projects across many industries, including supply chain, clearance and settlement, banking, and much more. Below is a list of links to the profiles of the projects from this table. The data you see on our profiles is only a small selection of the data we collect on blockchain use cases and adoption. To get access to more data, please book a demo with a member of our team.