If you think that blockchain technology will not have an effect on your industry—think again. The oncoming wave of blockchain advancements is crashing over all industries, and companies need to be prepared. The blockchain technology solutions company ConsenSys recently hosted an informative webinar detailing the effects of blockchain on the insurance sector, and the applications border on revolutionary.
From data sharing and policy administration, to claims mitigation and reinsurance, blockchain has the chance to reinvent insurance. We break down the main takeaways from this webinar to keep you informed on these advancements.
Insurance with Blockchain
The first takeaway was the effect of installing blockchain systems into the existing practices of the insurance sector, enhancing them and making them better, bolder, and more efficient.
Data sharing is a common blockchain use case, and can significantly affect the productivity of customer-insurer relationships. In this scenario, blockchain would allow parties to share data securely and immediately. This would break down silos, making it easier for customers to quickly share confidential data with their insurance companies while knowing that this information is protected.
Binding policies on a distributed ledger, like blockchain, leads to better policy management. With blockchain, you have incontrovertible proof of insurance—leading to fewer legal disputes over whether coverage existed at a certain time or at the time of an incident.
It also provides common documentation for complex reinsurance arrangements, including towers and treaties of risk, and can easily facilitate reinsurance where multiple parties are involved. Also, a blockchain-based smart contract could more accurately identify and document a First Notice of Loss (FNOL).
If insurers across the board in all different industries could share data securely, it could accumulate to a pool of data and a wealth of knowledge within coverage types (i.e. property, casualty, or auto insurance). This could give insurers a broader understanding of their particular industry, aiding in their ability to provide quality care.
The development would also bring about a blockchain automation of the subrogation process (the process in which an insurance company seeks reimbursement from the responsible party for a claim that has already been paid for a covered loss), allowing insurers to witness the information side-by-side on the same platform—streamlining the reconciliation process. And, with better claims data comes better ways to identify and mitigate claims fraud.
Insurance on Blockchain
Blockchain tech is also enabling new business models and practices in the insurance industry and is poised to push insurance to the next level.
Insurance companies using blockchain would use this to aid in the insurance of a “yes” or “no” event, such as a natural disaster. In these cases, with blockchain, the contract would be automated through a smart contract, eliminating the need for a third-party, broker, or intermediary (further streamlining the process).
This application has already been implemented in air travel insurance. Smart contracts automate typical insurance contracts. Basically, if X happens, then Y will automatically happen. For example, if your flight is cancelled and you have insurance, instead of having to file a claim with your insurance company, the insurer would automatically pay you.
Smart contracts will also make insurance easier to purchase. Because what’s underlying it is a smart contract, there is no need for intermediaries and you don’t need a network of agents, so you can just purchase it directly. This is very beneficial to developing markets globally.
With blockchain, users can control their data now more than ever. This allows insurance underwriters to learn more about their customers safely and in a way controlled entirely by the user.
This is reinsurance reimagined. If someone wanted to invest in the insurance industry, blockchain could facilitate the tokenization of those investments.
You have heard of peer-to-peer lending, now get ready for peer-to-peer insurance. This is by far one of the most radical applications of blockchain in the insurance sector. Using smart contracts, it would allow pools of risk to be shared among members of a network instead of working with an insurance company.
Insurance for Blockchain
Over the years, crypto and blockchain have grown exponentially—and many industries have struggled to keep up. With this rapid development came new risks and hazards that needed to be addressed quickly.
There are now crypto and blockchain-specific insurance policies, a feat never before seen, because it was never before needed. Insurance for blockchain is becoming a new market opportunity for the entire industry.
Curv and Munich Re
In May of 2019, Curv (a cloud-based wallet for digital assets) announced a cryptocurrency insurance partnership with Munich Re (an insurance company). This partnership offered $50 million in coverage for loss from external cyber breaches or internal rogue employees. This partnership also offers optimized security through its multi-party computation (MPC).
With a partnership comes the need for due diligence. Insurance companies will want to make sure that your security systems are “up to snuff” before providing coverage. There are a few software solutions that aid in this due diligence effort, such as ConsenSys’ Diligence, MythX, and Alethio.
Although the insurance industry has not historically been early adopters of technological advancements, the entire insurance ecosystem, including insurers, agencies and customers, has so much to gain from these innovations—and has already begun to use them to accelerate into a new age of inventive insurance.