Blockchain rolls on in insurance
Blockchain advocates say the day when insurance contracts are created, managed and guaranteed within blockchains has finally arrived.
The DAV Foundation, a blockchain-based transportation protocol, says it is building such a service. A shared transportation protocol, such as the DAV Foundation’s platform, would accelerate the insurance value chain. “After an accident, an auto insurer could use DAV’s communication protocol to work directly with all the stakeholders to quickly verify damage and initiate the claims process,” states DAV’s Bradley Berman. “Each step to resolve a case would be triggered based on events based on best practices and established via smart contracts using the DAV platform.”
In a related development, a group of tech and insurance leaders, including the ACORD industry standards group, announced an initiative within the maritime industry, called Insurewave, which supports support marine hull insurance.
Insurwave, built by a joint venture between EY and Guardtime, leverages blockchain and distributed ledger technologies Microsoft Azure infrastructure and ACORD data standards. “It will support more than half a million automated ledger transactions and help manage risk for more than 1,000 commercial vessels in the first year,” according to a statement issued by the joint venture. “By connecting participants in a secure, private network with an accurate, immutable audit trail and services to execute processes, the platform establishes a first of its kind digital insurance value chain.” A major shipping line, A.P. Moller – Maersk, is piloting the solution.
The joint venture’s leaders are pitching the offering as enabling “secure access to a single version of the truth to all participants in specialty insurance.” The new platform enables “claims to be paid in hours, not years, premiums to be agreed and settled in seconds, insurers to see the value of their risks in real-time, and shippers to track their assets more clearly.”
The proliferation of smart contracts across blockchain-based networks will enable global responsiveness within the insurance sector similar to that seen when banking and equities trading moved online, away from physical trading floors, according to Michael Cook, blockchain insurance lead at PwC, quoted in Raconteur. “It will create a virtualized marketplace,” which means “risk can be placed globally and need not require geographic proximity to an underwriter. Blockchain promises to disrupt insurance in the same way, replacing a physical trading floor with virtual, instantaneous trading and control across the entire value chain.”
Berman of the DAV Foundation sees a similar revolutionary impact on the auto industry. “Today, insurance rates and settlements are based on a policyholder’s vague and often misleading personal background and driving history. With a transportation blockchain linked to actual car data — such as a driver’s average speed, location, and braking patterns — insurers could base rates on actual behavior,” he states. In addition, “using smart-contract technology, auto policies could be highly customizable. Similar to crowdsourcing, newly formed safe-driving communities could spread risk among a group of careful drivers who would essentially insure each other. An agreed-upon algorithm would make sure that fiat money, or tokens, are immediately available in the case of a fender-bender.”
Berman also predicts the rise of “a new breed of remote, independent blockchain insurance adjusters adding value to the system -- and getting paid via tokens.”