A Vision for Proof of Authority in the Insurance Industry
Hello everyone. My name is Rocco Mancini, and you may have seen me in the Validator section of the Oracles Network team page. The reason why I am writing this article and why I applied to be a validator is because I believe that blockchain technology will transform the insurance industry. I also believe this day will come sooner than most people realize.
Oracles Network has the potential to be an early role player, if not a critical role player, in facilitating adoption of blockchain technology in the insurance industry, and I want to highlight an area where blockchain is already being used in the insurance industry today:
If you ever filed an auto claim or a homeowner’s claim, you might remember it being a long drawn out process with annoying paperwork and maybe even some degree of uncertainty involved. Now imagine if you were guaranteed to be reimbursed if a specific event were to occur, effectively eliminating this headache. Well, parametric insurance attempts to do just that! Parametric insurance is a type of insurance that makes a specific payment whenever a certain condition, often called a triggering event, is met. Insurers like parametric insurance because it eliminates some of the administrative work involved for the claims handling process where claims adjusters would normally determine if a claim should be paid and what the value of the claim is. This saves time, reduces costs, and helps to prevent fraud.
Today, insurers are seeking ways to automate the parametric insurance process with blockchain technology. AXA Fizzy’s smart insurance for delayed flights is a great example. An Ethereum smart contract is programmed to payout immediately once it receives a notification that the triggering event, your flight being delayed for 2+ hours, occurs. No need for additional paperwork. You just purchase the policy two weeks before your flight. It’s as simple as that! Both you and your insurer save time, and your insurer further drives down costs and reduces fraud.
This example is only the beginning though. Eventually, big data and technology may push a majority of insurance towards parametric insurance. Imagine a reality where your car transmits data to your insurer as soon as you get into an accident, and you quickly receive an automatic payment based on the damage. It might be our reality, and blockchain and smart contracts are critical to making this reality come true.
Where Does Oracles Network Fit In?
AXA is benefitting from blockchain and Ethereum smart contracts, but there is still room for improvement. Currently, Ethereum transactions can lack consistency (imagine if you want to purchase a policy but the transaction is delayed by several ICOs all happening on the same day) and don’t scale very well, which sometimes drives up the costs of transactions. Both of these issues are very problematic when the primary point of combining parametric insurance and blockchain is to consistently reduce costs and to consistently save time (imagine all of the customer support calls when transactions are delayed and people are expecting instantaneous results). Despite this, insurers are still racing to research and adopt blockchain. Solving these issues would only speed up adoption, and Oracles Network is trying to do just that. Oracles Network deviates from Ethereum with its Proof of Authority (PoA) consensus, which aims to be more consistent and cheaper than the Proof of Work (PoW) consensus mechanism used by Ethereum (the Oracles Network FAQ describes the PoA consensus very well). Oracles Network also builds upon the Ethereum protocol, which means that the smart contracts that companies like AXA are using will be compatible on the Oracles Network as well! So, if it is easy to deploy the same contracts on Oracles Network, and the contracts are cheaper/more consistent when deployed on Oracles Network as well, why wouldn’t insurers want to? I believe that they will, and it’s just a matter of time.
If you want to learn more about Oracles Network or the Oracles Network ecosystem, you can visit the following links for more information:
Project Website: https://oracles.org/
Project Forum: https://forum.oracles.org/