The insurance industry relies heavily on the notion of trust among transacting parties. For example, when you go to buy car insurance you get asked for things like your zip code, name, age, daily mileage, and make & model of your car. Other than, maybe, the make & model of your car you can pretty much falsify other information about yourself for a better insurance quote. Underwriters trust that you are providing the correct information, which is one of the many risks in the underwriting business.
Some Enterprise Blockchain like Oracle and Smart Insurance platforms like us here at Inmediate may essentially enable trust-as-a-service in such interactions. Participants (insurer and insured) need to come together to do business, but they do not necessarily trust each other. Blockchain provides a scalable mechanism to securely and easily enable trust in such scenarios. There are 4 key properties of Blockchain that enable trust-as-a-service:
- Transparency of digital events and transactions it manages,
- Immutability of records stored on the blockchain. through append-only time-stamped and hashed records,
- Security and assurance that records stored on blockchain aren’t compromised through built-in consensus and encryption mechanisms,
- Privacy through cryptography
Blockchain can be a good solution for a number of insurance use cases such as:
- Reducing frauds in underwriting and claims by validating data from customers and suppliers in the value chain
- Reducing claims by offering tokenized incentives to promote safer driving behavior by capturing data from insured entities like motor vehicles
- Enabling pay-per-mile billing for insurance by keeping verifiable records of miles traveled
- And, in the not so distant future, using blockchain to determine liability in case of an accident between two autonomous vehicles by using blockchain to manage timestamped immutable records of decisions made by deep-learning models from both autonomous vehicles right before the accident.
Besides these use cases, blockchain has the potential to eliminate intermediaries, improve transparency of records, eliminate manual paperwork, and error-prone processes, which together can deliver orders of magnitude improvement in operational efficiency for businesses. Of course, there are other types of insurance such as healthcare, reinsurance, catastrophic events insurance, property and casualty insurance, which would have some unique flavor of use cases but they would similarly benefit from blockchain to reduce risk and improve business efficiency.
There is no question that blockchain can, potentially, be a disruptive force in the insurance industry. But it would have to overcome legal and regulatory barriers before we see mass adoption of blockchain among the industry participants.