Does the use of Blockchains grant the ability to heighten security, improve customer engagement and provide automated insurance services? If so, then the benefits seem incontrovertible.
Recently, Mr. Daniel Robles, who is founder of The Ingenesist Project and chairman of the FinTech Task Force for the National Society of Professional Engineers, has posted the article “Insurance: The Highest and Best Use Case for Blockchain Technology”.
He explains most of it in 3 parts:
Part 1 answers the question: What problem does the blockchain solve? This article begins with a brief history of databases and draws the connection with how society organizes itself around technology, and why organizational incentives are important for insurance.
Part 2 suggests that if each component part of the blockchain system is insurable, then so too should the entire system be. The insurability of the individual components of a blockchain ecosystem, revealing a somewhat mixed outcome, will also be discussed.
Part 3 identifies how the insurance industry and the professional engineering
industry, together, can bridge the capitalization gap in blockchain system insurability.
“The legislation differs from country to country. For Greece, each insurance advisor is obliged to use the database system of the Ministry of Infrastructure, Transport and Networks. The agents are certified and authorized only to use this database because we have to eliminate the problem of privacy and security for both companies and consumers. The best use case to use the Bitcoin for is to buy the insurance contract for cars. But you cannot buy the life insurance or the pension insurance contract. Because, like in the case of Aspis scandal (has default 2011 and many people have lost money), the contracts are played in the Greek stock market, so the value is unstable already.
The group insurance is always one contract, but since it is life insurance we cannot connect it to the Blockchain. Has special rules to be followed that writes the total number of people that it covers by their names and is also played in the stocks, like any smart contract.
The online insurance has been deployed already in all agents office, so the cost has already fallen, but the main reason is the economic crisis of Greece, not the use of technology…
It still remains in the possibility of large companies to find a way of using it, and then we could follow this technology also.”
Sushil Pramanick, who is an IBM Cognitive Business Solutions Executive for key Insurance Accounts, has posted an article at his blog explaining the potential applications of Blockchain technology. He describes 6 use cases for Blockchains and he is convinced the possibilities are endless and it is for the insurance companies to invest, explore and experiment with the different use cases. He believes that regulatory compliance will be a considerate issue that will get addressed in coming years with better clarity and definition. Blockchain offers the potential for new products and services that have never existed before. It will open up insurance to whole new markets.
Matteo Carbone, founder of Observatory on Telematics, Connected Insurance and Innovation has shared his opinion on the matter:
“I didn't consider the legal angle is the main problem, my point is from the business perspective. Which is the reason for a customer to pay auto insurance with bitcoin? I judge the insurtech initiative on 4 axes (profitability, productivity, proximity and persistency)...from my point of view that is missing any impact on all of this issue.”
Responding to CoinIdol.com about the goals that people could achieve by using the Blockchain, and if these reasons are good enough for insurance companies, Matteo Carbone said:
“First you already have emission real time with the current system and in some countries some claims automation, the choice they claim is to not automatize. Secondly you pay a premium and the rules are defined by the contract, you would need transparency if you don't trust the other part (like in a p2p payment or lending) and finally this is an aprioristic sentence, no-one was able to demonstrate to me any additional saving on the using of it compared to a state of the art legacy system.”
Derick Smith, CEO at Chainreactor, provider of distributed trusted infrastructure at blistering speeds, said that the proposed data based systems could be extended to the creation of a database with the use of blockchain. He continued:
“We already have such a system in ChainReactor. An information technology platform aimed initially at large scale systems, typically deployed by enterprises and governments. Its foundational objectives are to provide scalable, fast and architecturally sound infrastructure upon which innovative and transformational applications and ecosystems can be built. ChainReactor owns and develops the platform, and the components it is comprised of. ChainReactor aims to proliferate the use of the platform globally and will scale its operations using its own technology. ChainReactor will change the fabric of society and commerce."
According to Derick Smith, to accomplish that, it will require insurance-specific applications to be built on top of ChainReactor. The underlying blockchain functionality will enable the new business models. Also, he mentioned that using Blockchain, people achieve reliable and faster versions of insurance policies, transparency of financial contract data and lower premium prices because of blockchain technology.
“Additional goals are: - real-time, and simplified regulatory oversight - 100% availability of systems - ability to enter IoT space with Man to Machine and Machine to Machine insurance and microinsurance. - Permissioned, real-time user data access for insurers in exchange for lower premiums - Use of (custom) cryptocurrency to achieve faster payments/settlements and reduce the claims and accounting overhead,” concluded Derick Smith.