5 Ways Blockchains Will Revolutionise The Insurance Industry

A blockchain is a public transaction ledger that is shared by all parties participating in a distributed network of computers.
The blockchain records and verifies the validity of each transaction using a set of revolutionary mathematical and crypto-graphical methods. This humanless process of verification removes the need for a central body such as a clearinghouse to protect the network from bad actors.
The blockchain enables people to transact with one another without needing to trust or have knowledge of the other parties. For this reason, the Blockchain is a potential game changer.

Blockchain technology alongside other forces of change will revolutionise the insurance industry in the following five ways:

1.Smart Contracts will make insurance more efficient

Smart contracts are self-executing contracts in which terms and conditions between the contracting parties are defined within the code.
Some types of insurance are ideally suited to smart contracts. When you buy travel insurance, for example, the terms and conditions could be written out for you in the text, but it would also be codified into computer code which, upon you claiming that your flight was cancelled, could:
a. confirm the flight was late using public records and b. that you were present on the flight by confirming with the airline. The smart contract could then automate the claims payout to you in real time without the need for much, if any, emails, phone calls, forms, or staff input.

2. Identity and medical record sharing will become easier

Some types of insurance require medical records to be shared and identities to be verified. The blockchain enables this information to be safely and securely exchanged with the correct parties through cryptographic protocols that enable you to prove who you are and your medical history without directly sharing your identity and medical documents. This process is possible through the use of math, computer science, and cryptography. Sharing information in this manner improves the security of your identity as you can control what is seen, by whom, and for how long.

3. Pricing by underwriters and actuaries will become easier

The entire history of an items assembly, purchase, and use can be placed on a blockchain which brings benefits for the manufacturer, purchaser, and potentially insurers and reinsurers who will be able to price contracts more optimally. Understanding, when a car was made, by whom, how many miles it has done, and what accidents it has been in, helps insurers better price the risk. This information can also be paired with information about the insured to improve their pricing of risk. Public knowledge of an item's lifecycle also improves the ability of the customer to price assets.

4. Smart contracts will enable new types of insurance products

In the future blockchains are likely to have ‘Oracles’ - digital services that verify whether or not certain ‘real world’ events took place such as: did it rain in the postcode CA1 7PQ on 04/04/2018 at 15:02?
Oracles can verify whether certain activities took place. Smart contracts can define and execute the terms and conditions of the contract based on the Oracle’s verification that a given event did or did not take place. This contributes toward the possibility of new types of insurance products:
a. Automated Peer to Peer insurance without the need for a centralised body to administer the policies and claims
b. Blockchain-based travel delay insurance
c. Single event niche insurance such as hedging sports bets, contents insurance for a day.
Most of these new business models would most likely need regulatory approval.

5. Information sharing with third parties will become easier and more transparent

Insurers need to share information with fire departments, police departments, and many other bodies. Some of this information will be accessible via blockchain Oracles which will make information sharing between government bodies, insurers and others much quicker and cheaper.

Conclusion

Many forces will converge onto the Insurance industry that will force it to change.
Blockchain technology will be one of those forces, alongside:

1. Government regulation
2. automation
3. AI
4. machine learning
5. fintech innovation
6. autonomous cars
7. connected homes
8. IoT
9. Changing needs of a younger demographic