Blockchain and Insurance: Match Made in Heaven?
At a conference a couple of months back, I heard Irving Wladawsky-Berger, a former IBM executive and digital-age thought leader whom I greatly respect, respond to a question about Blockchain, an emerging distributed technology that serves as the foundation of the Bitcoin virtual currency. “Blockchain is highly distributed, and to most people like myself it’s really weird right now,” he says. However, he observed, other distributed approaches, including the Internet itself, seemed “really weird when it first showed up.”
Indeed, Blockchain is one of those terms that keeps popping up across the tech landscape, yet its structure and purpose is still unclear to many.
Essentially, to give you the elevator speech, Blockchain is a virtual, shared ledger – you could call it a database -- that exists in cyberspace that enables users to track records and accounts. It’s most commonly associated, at this time, with Bitcoin, and serves as a neutral way to keep tabs on accounts. According to Wikipedia, Blockchain is highly secure as it “maintains a continuously growing list of data records hardened against tampering and revision, even by operators of the data store's nodes.”
Some observers feel blockchain will soon be extending its role beyond Bitcoin to serves as the foundation for many other types of transactional values, such as enterprise finances. In a recent post, Richard Kastelein, founder of Blockchain News, explains why Blockchain is so secure, and speculates that blockchain technology would be a good fit for the insurance industry.
Imagine there’s a notary present at each transaction,” Kastelein writes. “This way, everyone has access to a shared single source of truth. This is why we can always trust the Blockchain.” That’s because “in the Blockchain, all transactions are logged including information on the date, time, participants as well as the amount of every single transaction in an immutable record,” he explains. “If anyone attempts to corrupt a transaction, the trust agents will not arrive at a consensus and therefore will refuse to incorporate the transaction in the Blockchain.
For example, he illustrates, “imagine a healthcare insurance policy that can only be used to pay for healthcare at certified parties. In this case, whether someone actually follows the rules is no longer verified in the bureaucratic process afterwards. You simply program these rules into the Blockchain. Compliancy in advance.” In addition, “Blockchain technology can allow for accident or health records to be stored and recorded in a decentralized way which can open the door for insurance companies to reduce friction in the current systems in which they operate.”
Kastelein calls for more investment by the industry in Blockchain-focused startups, to help fuel more development in this area. He notes that the banking sector is already light years ahead in terms of supporting Blockchain approaches.