How will blockchain technology affect Insurance Industry? Some ideas for decentralized applications in the Insurance domain, which will make insurance companies more trustworthy and will eventually eliminate all the inefficiencies in a way that the exchange of sensitive information between partners will be safer.
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How could Smart Contracts affect the Insurance Industry?
1. How could Smart Contracts
affect the Insurance Industry?
Discourses on some use cases
2. A little bit of myself
George Theofilis
Blockchain Developer @ Synaphea.
Synaphea was an inspiration of mine, with the ambition to make the
transition to a decentralized world easier for a business.
I am working with DLT authoring smart contracts on Ethereum and
Fabric and I am also creating a web based front-end for smart
contract application.
• 4+ years of experience in software engineering.
• Contributor @ iroha-javascript
3. Issues/Opportunities on Insurance Tech?
Improve trust
Lack of trust, high costs and
inefficiency of the insurance
industry all play a part in
the extraordinary high levels of
underinsurance.
Enhance efficiencies
There is a lot duplication when
customers give their personal
data, in addition some records
can’t digitized because of the fear
of a fraud.
Improved claims processing
through smart contracts
Insured individuals typically find
insurance contracts long and
confusing while the insurance
companies are battling an
extraordinary amount of fraud.
Fraud detection and
prevention
A great portion of claim requests
are fraudulent, as an example in
USA 50% of them are scams.
4. Use case in the Industry
One consortium and two very prominent
applications.
5. Individual
Prototyping
B3i
Prototyping
B3i Parallel
Run
2016
Fictive contracts,
fictive data
2017
Real contracts,
fictive data
2018
Real contracts, real
data
The first product developed by B3i is a Property Cat
XOL contract.
The Prototype covers the core functionality required
to enable a distributed smart contract management
system for Property Cat XOL contracts.
B3i
Blockchain Insurance Industry Initiative
6. Ethersic
Problem: By law, airlines are required to compensate
travelers for flight delays or cancellations, but as
anyone who has tried knows, the process is a
nightmare.
FlightDelay & Fizzy
Flight insurance policy
Passenger
Insurer
Buys a coverage
package, and he pays
a fare. In case of a
flight he is payed by
the smart contract
He offers a insurance
package
Solution:
7. Norbloc, KYC-Chain, Tradle etc.
KYC on Blockchain
PROS
• Building a trust provisioning network
• Efficiency and trust in identity
• Secure, compliant data sharing
• Proper compliance
• Full transparency
• Reduced duplication
• No more papers
COS
• Personal data protection
• Deletion of user data
• Share data between companies,
confidentiality issues
8. Future applications
Some ideas for blockchain application
Market Investments Matching of the transaction details of the buyer and seller
Financial Audit and reporting Standardization would allow auditors to verify a large
portion of the most important data behind the financial
statements automatically.
Index based livestock Insurance
Program
Once a certain dryness threshold is reached, the farmers
insured under the scheme automatically receive a lump sum
payment which they can use to buy feed for their livestock.
Internet of Things (IoT) In usage based insurance
Parametric insurance Fully automated insurance products where an insurance
contract is captured using smart contract language
Automate underwriting and claims
Handling
Automating the underwriting of policies and claims handling – combined
with approvals/verifications from other policyholders
Insurance of high-value assets Faster cycle time and possibly no touch claims handling
Medical claims processing By capturing and tracking changes to the claims file on a shared ledger, and
confirm the applicable terms and conditions at various processing steps in the
claims processing chain.
9. Adoption challenges
Building a comprehensive
set of asset profiles and
history
Engaging the market and
enforcing a specific DLT as
dominant mechanism for asset
registry may be challenging to
implement and will require
stakeholders diligence
Adopting standards for
relevant claims data
Changing current company-
specific processes and data sets
to a shared standard will require
extensive discussion and
converging interests
Providing a legal and
regulatory framework
Careful and close collaboration
would be required since
stakeholders will likely have
competing interests and senses
of urgency to establish a shared
framework
Source: IBMs Blockchain: Emerging Use Cases for Insurance
10. You can find us at:
www.synaphea.com
github.com/synaphea
info@synaphea.com
Editor's Notes
There’s a crisis of trust in the financial services industry. Even though the large banks are the focal point, the erosion of trust impacts all businesses. Lack of trust, high costs and inefficiency of the insurance industry all play a part in the extraordinary high levels of underinsurance. For example, only 17% of California households carry earthquake insurance even though the likelihood of experiencing losses from an earthquake are high. Blockchain facilitates building trust of consumers because it provides transparency.
Anyone who has changed insurance companies or healthcare providers knows how inefficient the data-entry process is to get coverage or care started. In addition, customers have a very real fear of losing control over their personal data. Blockchain provides a solution to drive efficiency and security that would allow the personal data to be controlled by an individual while verification is registered on the blockchain. Tradle is one company trying to develop blockchain solutions for know-your-customer (KYC) data. The goal would be to have the KYC data verified and then it could be securely forwarded to other companies to use without the need to repeat the data entry or verification process.
The insured and the insurer each currently have issues that blockchain and smart contracts could solve. Insured individuals typically find insurance contracts long and confusing while the insurance companies are battling an extraordinary amount of fraud. Through blockchain and smart contracts, both parties would benefit from managing claims in a responsive and transparent way. It would start by recording and verifying contracts on the blockchain. When a claim is submitted, the blockchain could ensure that only valid claims are paid. The network would know if there were multiple claims submitted for the same accident. When certain criteria are met, a blockchain could trigger payment of the claim without any human intervention, therefore improving the speed of resolution for claims.
One of the most compelling reasons insurance companies should investigate blockchain is its potential to detect and prevent fraudulent activity. An estimated 5 to 10 percent of all claims are fraudulent which, according to the FBI, costs U.S. on-health insurers more than $40 billion per year. Validation is at the core of blockchain technology’s decentralized repository and its historical record which can independently verify customers, policies and transactions for authenticity. In order to work to its full potential, this would require extensive cooperation between insurers, manufacturers, customers and other parties who would use the blockchain to share info to prove policies, purchases of products, verify police reports and more. Blockverify offers a service for users to check for stolen or counterfeit goods and fraudulent transactions by storing the history and supply chain in the blockchain.