Blockchain sets to better manage risks

In a world where people are increasingly interconnected and firms become more reliable on entire ecosystems rather than on their own market-related decisions, many are the potential risks to which we are exposed, especially when it comes to the digital world. The insurance industry has become so important that it is unthinkable for any kind of business to remain unprotected against potential risks waiting to crop up right from behind the corner. Despite selling an abstract product whose actual value is often underestimated, insuring one’s own activity or products means going to sea and having the right tools not to sink at the first whole on your boat.

Much of the activities involved in insurance are related to trust, and since trust is one of the main elements the Blockchain revolves around, Insurance itself has easily become one of the industries that are going to experience most the changes brought by this disruptive technology. Insurance giants such as Allianz, Ping An, John Hancock and also insuretech startups have been under the spotlight as of late for investing massively in blockchain and undertaking pilot tests to understand where the technology might bring them in the future. Three are the main areas in which the Blockchain is going to improve the efficiency of the industry:

• Products offering: insurers are now trying to leverage big data to better assess risks and therefore offer better products to their clientele. A Blockchain-based record of transactions might enable insurers to better understand the trends related to a certain product and therefore the resulting risks. The outcome would be better pricing for insurance products and even prevent or counter fraud
• Claims execution: claims contracts are often long winded and really hard for customer to understand because of the juridical language in them. As a result, the enforcement of such contracts often meets with setbacks and protraction over time because of disputes between the insurer and the insured. Through the implementation of smart contracts, Blockchain might reduce frictions in claims enforcement that are due to lack of trust towards the insurer, thereby reducing transaction costs and timing. In practice, if your “IoT smart sensor-equipped” car suffers damage from an accident, the event might be immediately proved and signalled to the insurer’s database, the claim might be automatically and instantaneously processed and you might immediately receive automatically-computed compensation.
• P2P insurance: with the Blockchain enabling trust among parties, very soon we might see the rise of exchanges directly between people who seek insurance and individuals willing to insure them