Insurance
Identifying practical applications of Blockchain technology in the insurance sector
Companies in the insurance industry could benefit from streamlined, automated processes that are faster, cheaper and more secure by adopting Blockchain technology. Whilst these benefits are the core of what makes Blockchain great, there are potential future applications that could lead to new products being offered by insurance companies based on accelerated processes and peer to peer networks.
SECTOR USES
Insurance companies have started to take advantage of quicker and cheaper internal processes by using Blockchain based systems to carry out everyday tasks.
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PROCESS EFFICIENCY
Process Efficiency
Once there is an understanding of what the Blockchain can achieve, it does not require much of a leap of faith to understand how it can maximise the efficiency of the claims process. Indeed, tech start-up Tierion has already proved this to be the case. The required ‘proof of working’ as an insurance claim is passed through departments is highly visual and easier to monitor via a blockchain, reducing the time that lapses between point of claim and resolution.
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REDUCED COSTS
Reduced Costs
Tons and tons of paperwork: that is what has dogged the insurance industry for decades now. As a multi-stage process this has been unavoidable for a number of years, but thanks to Blockchain technology the way in which insurers operate can be sped up and accuracy improved simply via Blockchain implementation. Administrative resources can be deployed elsewhere, with documentation logged and shared via the chain; rather than reams and reams of paper.
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INSTANT POLICIES
Instant Policies
Typically insurance policies require the intervention of human hands – even when purchased via the web – and this can often slow the process down; particularly at weekends. What Blockchain can offer is an automated and streamlined service that can be facilitated without the need for manual interaction....and this opens up the possibility of ‘instant’ insurance policies. Fancy going out on the bike on a nice sunny day? Blockchain technology will, one day, be able to insure you instantly.
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P2P INSURANCE
P2P Insurance
Blockchain could, ultimately, change the way that the insurance industry operates. Rather than going straight to an insurer when they want to get their vehicle covered, a driver may now instead opt for a ‘P2P’ style policy in which he clubs together with other drivers on a blockchain to create an identity and thus insure one another. With ‘sharing economy’ companies such as Uber becoming increasingly popular, this could become reality sooner than expected.
COMPANIES USING BLOCKCHAIN
Companies have started to use Blockchain technology to create applications for the insurance sector, allowing insurance companies to improve the products they offer, optimise their internal processes, and create new services for their customers.
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Rootstock
Rootstock is an open-source peer-to-peer smart-contract platform and payment network with a 2way peg to Bitcoin. Rootstock goal is to add value and functionality to the Bitcoin ecosystem by enabling smart-contracts, near instant payments and higher-scalability.
"Our idea is to target specific needs that we detected in Latin America in different areas and also launch Rootstock with some real use cases; companies and organisations that want to start working on smart contract execution."
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Rootstock
Diego Gutierrez Zaldivar - Rootstock co-founder
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Dynamis
We are building Dynamis to prove what smart contracts can do and to develop the next generation of web 3.0 tools. Our first project is a peer to peer supplemental unemployment insurance protocol which uses policy holders' social capital to replace underwriters. Our vision for this project is to create an insurance DAO which is capable of evolving to meet policy holders needs through the use of new consensus mechanisms, an organization which is completely transparent, and auditable and answers only to its policy holders.
“In the future social networks will be the cheapest and most used decentralized data feeds for various different insurance applications. Our social networks will validate and verify our statements as lies or facts."
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Dynamis
Joshua Davis - Dynamis co-founder
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Tierion
“Check the receipt.” It’s a simple phrase that we hope you’ll be hearing more frequently. We see a future where Blockchain receipts are used to verify everything from medical records to online purchases. We’ve started by making it simple to collect data and record it in the Blockchain. It’s the first step in our vision for bringing the Blockchain to business.
"We showed how insurance companies can use the blockchain to create an immutable audit trail for claims processing. Tierion makes it easy to build this capability into existing software."
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Tierion
Wayne Vaughan - Tierion CEO
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Everledger
• Everledger is a permanent ledger for diamond certification and related transaction history. Verification for insurance companies, owners, claimants and law enforcement. Its technology can be extended to track any asset that carries a ‘unique identifier’ which is difficult to destroy or replicate. For our smart contracts, it combines its private blockchain based on the Eris stack with the Blockchain in order to achieve a hybrid model; neither fully public, nor fully private. It does this in order to get the best of both worlds; high security of a public blockchain, and the complexity and amiability of a smart contract enabled private one. Its smart contracts are also Ethereum ready and will be deployed to it when the Ethereum blockchain moves out of test phase.
"Diamonds are just the start, and our vision is so much bigger... we're going to help in combating counterfeiting, and that's not a fifty-billion-dollar problem — that's 1.7 trillion."
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Everledger
Leanne Kemp - Everledger CEO
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ISSUES SOLVED BY THE BLOCKCHAIN
The insurance industry spends over $2 billion each year on fraud and compliance, but the use of Blockchain systems could significantly simplify the claims process. Providing insurers with greater access to reliable data records and creating a direct link between the customer and their insurance provider could revolutionise the way insurance companies do business.
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REDUCING FRAUD
Reducing Fraud
Fraud is still a serious problem in the insurance sector, with fraudulent claims and payouts made everyday with companies sometimes not knowing if the person behind the claim is who they say they are. Using Blockchain, decentralised ownership certificates with registration numbers and laser inscribed IDs could be given to an item. This would help insurance companies automatically identify fraudulent claims during the claim process reducing losses and reducing the requirement for expensive manual checks.
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EXPANDING REACH
Expanding Reach
While insurance is a sector that is heavily reliant on the dissemination of information between parties, at present most new business is based on the proximity of an organisation to a potential provider. The London Market – an international insurance market based in the UK – however, is looking to modernise the process by creating online deal rooms supported by Blockchain, which would make it easier for international businesses to access information and broker deals globally.
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ACCELERATING CLAIM PROCESSING
Accelerating Claim Processing
Nearly all insurance companies use a network of outside providers to process claims and this can be a costly and time-consuming process. Typically, when an individual makes a claim they are contacted by an operator in call centre who collects details about their incident and passes these on to the insurer. Using a Blockchain system, however, a direct link could be provided between claimant and insurer, with all data being directly uploaded and an audit trail being provided for every step.
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RECORD KEEPING ACCURACY
Record Keeping Accuracy
One of the most obvious advantages of using Blockchain in the insurance sector is the possibility of creating identity ledgers that would create more effective relationships between insurance companies and their customers. Not only would this incorruptible record of information offer almost complete protection from identity and claim fraud for the customer, but it would allow the company to more expediently assess a client’s history and personal data to offer more effective solutions.
FUTURE POSSIBILITIES
Blockchain technology has the potential to remove a vast majority of human interaction between processes, relying on decentralised autonomous organisations, smart contracts and identify ledgers to carry out insurance based processes with speed, efficiency, and security. This could lead to a large shift in the way people buy insurance, moving from large institutions to community based insurance groups.
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SMART CONTRACTS
Smart Contracts
A smart contract is a contract between two or more parties that is created and stored in the Blockchain. Contractual clauses may thus be made partially or fully self-executing, self-enforcing, or both. Smart contracts aim to provide security superior to traditional contract law and reduce other transaction costs associated with contracting.
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DAOs
Decentralised Autonomous Organisations
Ownership of a mutual insurance DAO creates a community around the policy. One possible way to organize an insurance DAO is by treating all the individual policy holders as shareholders. DAOs can exist such that the policy and its pool of premiums is not under the control of any one person or select group of people (i.e. board of directors). The DAOs pool of capital belongs to everyone who has a policy and only a majority or super majority can decide to use the capital in the pool for anything other than paying out claims.
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ALTERNATIVE RISK MANAGEMENT
Alternative Risk Management
Blockchain technology could favour the emergence of alternative risk management models shifting away from risk pooling, the predominant model in insurance.
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IDENTITY LEDGERS
Identity Ledgers
They also found that blockchain-based identity ledgers could prove useful to the insurance industry, and may even rival government-run databases utilizing biometric authentication. When speaking to Inside Bitcoins, Peter Kirby, the co-founder of Factom, explained how an insurance company could use identity ledgers in a blockchain business model. “An identity ledger is basically a whole list of who’s who. It can have you, your brother-in-law, me and anyone else you know put in a big list. This list could be considered ‘the family’ and no one else can be added to the family,” Kirby explained - Clay Gillespie - Inside Bitcoins
“If a diamond is stolen and recovered on the other side of the world, this database can allow the police to determine quickly the history of the item and its insurance details.”
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Simon Taylor -
VP Entrepreneurial Partnerships at Barclays
“The idea that it will pay out against the insurable event without the policyholder having to a make a claim or the insurer having to administer the claim has significant attractions.”
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Rick Huckstep -
Insurance Tech Strategic Advisor
“Efficient and transparent quote systems generated on Blockchain technology could lead to better quotes for customers, especially in the car insurance market”
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Caeva O'Callaghan
CEO of Quoteme
Blockchain: understanding the potential
How Blockchain Technology Might Transform Personal Insurance
December 2014
Lloyd's Sees Blockchain's Potential For Insurance Markets
27th November 2015
Submission
If you know of a practical application of Blockchain technology in the Insurance sector that isn’t currently being featured here, please send us your submission. There are many companies and uses of Blockchain technology that we haven’t featured in our initial launch, but we want to build a comprehensive resource outlining the practical applications of Blockchain technology and will be building this resource further in the future.