Block Chain in Insurance

Cryptocurrency and Blockchain technology is a big topic of discussion these days. Usage of Blockchain technology in Insurance is a buzz word. It’s always necessary for Insurers to scout and evaluate new technologies to stay on top of the ladder and for better customer experience.

Here are couple of use cases that are currently experimented by Insurance Industry.

  1. Flight Delay and Cancellation (Travel Insurance) – A Germen startup designed a prototype using Smart contracts on Ethereum platform for travelers offering Insurance if there is a delay or cancellation of flights. Policy issued is converted into Smart contract and is uploaded on the block chain. With publicly available data on Flightstats.com, a claim is initiated and paid automatically if there is any flight delay or cancellation.
  2. Train Delay and Cancellation – This is like the above flight delay and cancellation. API connects to the ticketing system to validate if the insured has valid ticket, based on the validation a claim is initiated to pay for cabs, hotel booking and other related expenses caused due to delay or cancellation.
  3. Crop Insurance – Prototype that use weather APIs to offer Insurance to farmers to subsistence farmers for crop failure caused by weather events.
  4. Life Insurance Claims initiation– Use of public data like death registry or social media with key words to identify if the Insured is dead and initiate a claim for further processing.

Block chain based products can be built on Ethereum platform and can be offered to customers by carriers – with or without brokers. Reinsurers can also buy the blocks from this platform and can be part of the block chain. Further the Block chain offers transparency to policy holders and other stake holders knowing the complete risk pool.

What is a Smart Contract?

Unlike traditional contract Smart Contracts are self-executable contracts with terms and condition mentioned in a piece of code. These executes automatically when terms and conditions of the contracts are met without any manual intervention.

What is a Block Chain?

Block Chain is Distributed, Open or Public Ledger. Unlike traditional ledgers which are closed ledgers and stored in one or more servers, Block Chain provides the transparency in the transactions and security of not losing the data. This was initially developed for Bitcoin but later extended to other cryptocurrencies.