6 Insurance Blockchain Applications to Check Out
Published July 7, 2016 12:54 PM
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Updated July 8, 2016 10:55 AM
1 Min Read
Investments in blockchain-related start-ups across industries have grown to more than $800 million , according to McKinsey and the insurance industry is taking note. In the consultancys Blockchain in insurance opportunity or threat? study released this week, McKinsey takes a look at several blockchain use cases, and identifies some of the companies leading the way in bringing this technology to insurance.
What is Blockchain?
McKinsey defines blockchain as a distributed register to store static records and/or dynamic transaction data without central coordination by using a consensus-based mechanism to check the validity of transactions. The technology, which grew out of the online currency Bitcoin is suited for applications requiring transparency on records with a permanent time and date stamp, such as titles, document histories, and notary services. On the insurance side, Allianz piloted a blockchain-based smart contract that automates catastrophe swap transactions, and other insurers including AXA and Generali are investing in blockchain applications, McKinsey says.
Use Case 1: Customer onboarding
Allianz pilot is unique in that it came from an insurance company directly. Technology startups tend to be the ones targeting the insurance value chain with blockchain solutions. McKinsey cites the example of Tradle, which is developing blockchain-based technology that allows customers to verify identity data once, then forward that data as a package to interested parties without having to re-enter.
Use Case 2: Transparency
McKinsey shares the story of the startup InsureETH, which offers peer-to-peer flight insurance policies. Using blockchain technology, InsureETH payouts are initiated when cancellations or delays are reported from verified flight data sources, so that customers can be assured that the insurer wont hold up their payouts.
Use Case 3: Automation
Dynamis is developing peer-to-peer supplemental unemployment insurance and uses social network profile data to verify employment status, McKinsey reports. Bitcoin-powered smart contracts automate claims and underwriting, combined with verifications from other policyholders.
Use Case 4: Fraud Detection
Blockverify labels products and stores the history and supply chain in the blockchain, allowing users to check for counterfeit products, diverted or stolen goods, or fraudulent transactions, McKinsey says.
Use Case 5: Emerging Markets
Though still theoretical, blockchains with smart contracts could be applied to micro-insurances to offer them at low handling costs, if underwriting and claims handling can be automated based on defined rules and the availability of reliable data sources, McKinsey says.
Use Case 6: The Internet of Things
McKinsey posits that electronic devices or home appliances can have their own insurance policies registered and administered by smart contracts in a blockchain network, automatically detecting damage first and then triggering the repair process, as well as claims and payments.