We’re used to having insurance for our healthcare, lives and cars, but today’s multi-trillion-dollar insurance industry also covers lots of other things. Pets are insurable. Traveler’s Insurance covers kidnapping. Even Bruce Springsteen has his voice insured for $6 million. The list goes on.
Blockchain in Insurance
Well-established and valuable though it is, the insurance industry has plenty of problems — including inefficiency, fraud, human error and, most concerning of all, cyberattacks. In 2015, Anthem Insurance revealed a data breach that exposed the sensitive data of nearly 80 million customers and had to pay $39 million to a group of State Attorney Generals in its most recent lawsuit.
Blockchain’s ability to create trust in a trustless ecosystem through the use of public ledgers and fortified cybersecurity protocols has positive implications for the insurance industry’s future growth. Along with artificial intelligence and big data, the potential that utilizing blockchain in insurance will unlock hinges upon three unique features in particular.
Blockchain in Insurance Applications
Blockchain optimizes the efficiency, security and transparency of the insurance industry. Distributed ledger technology has beneficial applications for streamlining insurance claims processing, boosting cybersecurity protocols and even speeding up payment times.
Smart contracts enable blockchain users to transparently transfer anything of value without the interference of a middleman. Like physical contracts, smart contracts stipulate the rules between two parties. Unlike physical contracts, smart contracts can track insurance claims and hold both parties accountable.
Insurance policies could be written as coded, decentralized smart contracts in which an individual agrees to pay the insurance company money in return for the company’s promise to help cover that person’s future medical costs. Blockchain smart contracts will create immutable data based on an insurance policy owner’s records that can immediately accept or refute any insurance claims made to the company.
If any false or fraudulent claims are made by the policy owner (or if an insurance company no longer agrees to cover a condition previously agreed upon), a smart contract will immediately dissolve and the premium payments will transfer back to the individual. The process creates a sense of mutual trust between the two parties for two reasons: all data is transparently displayed, and the slightest contractual deviation results in restitution to the harmed party.
Because the insurance ecosystem contains millions of insurers, healthcare providers and patients, it’s easy for the industry to get bogged down by money- and time-wasting inefficiency stemming from billions of forms, human error and poor communication between parties.
Digital ledger systems like blockchain can help automate outdated processes, save billions of hours of paperwork each year and reduce human error because all forms and data are safely stored along the chain.
Communication between important parties in an insurance claim can also be improved through distributed ledger technology. If stored on a blockchain, a patient’s medical history can be safely viewed by doctors and insurers to determine correct policies and procedures going forward.
Blockchain’s ability to safeguard sensitive information is especially enticing to an industry that heavily relies on data gleaned from being at the intersection of health, work and personal life.
Blockchain’s ledgers are decentralized, so they can’t be corrupted or manipulated by one authority. Instead, all data is chronologically timestamped to ensure a clear recording of events.
And while blockchain data is encrypted, it’s also completely transparent to members (nodes) on a chain — meaning that all nodes can view the actions of an individual whose true identity remains hidden. This system enables blockchains to quickly suss out any unusual behavior and take care of problems before they become major issues.
The insurance companies below lead the pack in implementing blockchain’s ledger technology.
Top Blockchain Insurance Examples
Blockchain in Insurance Examples
- ConsenSys Software Inc
Location: Armonk, New York
IBM streamlines various aspects of the insurance industry with its initiative IBM Blockchain. Through this field of research, the company has helped insurance groups automate their underwriting and claims processes. These changes have led to reduced completion times and fraudulent claims, enabling insurers to increase trust with their customers and deliver more efficient and consistent service.
Location: Columbus, Ohio
Despite being a long-time insurance presence, Nationwide Insurance is committed to innovation in the industry by using blockchain technology. Not only did the company join the RiskBlock Alliance, but it also was the first to embrace the alliance’s blockchain platform. The platform supports safer and faster proof of insurance, allowing customers to quickly verify their information with law enforcement and jumpstart the claims process.
Location: Fully Remote
ConsenSys’s blockchain suite aims to address many of the flaws within the insurance industry. While the company’s Codefi tool makes it easy to build decentralized networks for commerce, the Diligence feature provides smart contract audits and other safety measures. Insurers can embrace these blockchain technologies to enjoy benefits like automated audits, immutable claim records and convenient data exchanges.
Location: New York, New York
Deloitte works with clients to integrate new technologies into their workplaces, such as introducing blockchain to insurance groups. After conducting a health and life insurance study, the company found it can use blockchain technology to protect health records, complete agreements via smart contracts and detect fraudulent claims. As a result, insurance entities can adopt Deloitte’s blockchain strategies to nurture stronger relationships with patients and customers.
Location: New York, New York
Lemonade combines AI and distributed ledger technology to offer insurance to renters and homeowners starting at $5 and $25 a month, respectively. Blockchain comes into play through smart contracts. The company’s business model takes a fixed fee from each monthly payment and allocates the rest toward future claims. If a claim is made, the blockchain’s smart contracts will immediately attempt to verify the loss so a customer can get paid quickly.
Location: Palo Alto, California
Guardtime develops blockchain solutions across the cybersecurity, government, finance, defense and logistics industries. The company has teamed up with logistics giant Maersk to implement a blockchain-based maritime insurance platform that manages risk, uses smart contracts and establishes an immutable chain-of-shipping to help insurance companies thoroughly provide coverage.
Location: Fully Remote
Etherisc is an open-source development platform that focuses on decentralized insurance applications. The company builds decentralized, blockchain-centric applications for different sectors of the insurance industry. It is focused on using ledger technology to cut down on inefficiencies, like high processing fees and extensive claim-processing times.
Location: Fully Remote
The Blockchain Insurance Industry Initiative (B3i) is a cohort of insurers formed to explore the usefulness of blockchain and distributed ledger technology in the insurance industry. Formed in 2016, the company’s mission is to use blockchain to improve the way data and payments are managed, reduce risk and to make insurance more affordable. One of B3i’s products is an application that completely digitizes the reinsurance process for a smoother process.
Location: Falls Church, Virginia
Dynamis is a peer-to-peer insurance company built completely on the Ethereum blockchain. It is focused on unemployment insurance (or what they call “social capital”). Policy applicants need only provide their LinkedIn profile to verify current employment status. For those who are unemployed, the company’s blockchain will verify through profile connections and issue insurance payments.
Location: San Francisco, California
Tierion equips insurance companies and other businesses with its Chainpoint and Proof products, which allow groups to develop blockchain networks where they can record, track and verify data. The company’s technology excels in the area of claims processing, reducing the amount of time and money it takes to process each claim. Insurers can also wield these blockchain capabilities to single out false claims and remain in compliance with industry standards.