Blockchain and the Insurance Industry

By: Laura Marissa Cullell
Senior Blockchain Consultant

Insurance has become an integral part of our everyday lives. From auto to health and employment, insurance provides a sense of security should anything unexpected occur. Unfortunately, there are inherent problems within the insurance industry with regards to claim process wait times, and meticulous requirements. Insurance, for being a centuries old institution, has resisted change and is still stuck in the past.

In this article we look at what blockchain technology has to offer, how it can positively disrupt the insurance industry, and examine some risks and challenges.

What Blockchain has to offer

According to a PwC report 56% of firms said that they recognized the importance of blockchain, while 57% conceded that they they did not yet know how to respond.

Blockchain offers enhanced efficiencies, trust and provides improved claims processes and transaction management through the use of smart contracts. Deloitte argues that new insurance processes and business models built on blockchain will call into question current orthodoxies and challenge multiple pain points that are prevalent across the value chain.

Blockchain also allows for innovative products and services for growth. It can improve customer engagement through personal data. McKinsey’s Report titled: Blockchain in Insurance: Opportunity or Threat states:

“Customers’ fears about losing control of personal data as soon as it is handed over to a company and their frustration with the need to repeat data entry processes can be addressed by a customer-controlled blockchain for identity verification (see KYC use case) or medical/health data.

Personal data does not need to be stored on the blockchain; it remains on the user’s personal device. Only its verification, e.g., through a doctor, and related transactions (e.g., an examination that has taken place on a certain date) are registered in the blockchain. Here, scale is key to reaping the benefits of blockchain as it requires a sufficient number of parties involved to reuse the verified data.”

Applications of Blockchain

The applications of blockchain are not limited to the following:

Minimizing the Double-Spend Problem: To date, Blockchain is the first-ever solution to the double-spending problem that does not require a central administrator or clearing Agent. This is well suited for applications requiring transparency on records with a permanent time and date stamp, such as titles, document histories, and notary services.

Fraud detection and risk prevention: One of the main compelling reasons insurance companies are investigating blockchain is because of its potential for fraud detection, prevention and risk prevention. By moving insurance claims onto an immutable ledger, blockchain can help eliminate common sources of fraud in the insurance industry.

Property & casualty (P&C) insurance: A shared ledger and insurance policies executed through smart contracts can bring an order of magnitude improvement in efficiency to property and casualty insurance.

Health insurance: Through the blockchain, medical records can be cryptographically secured and shared between health providers, increasing interoperability in the health insurance ecosystem.

Reinsurance: By securing reinsurance contracts on the blockchain through smart contracts, the blockchain can simplify the flow of information and payments between insurers and reinsurers. Within reinsurance, the benefits of blockchain include more accurate reserve calculations based on actual participating contracts and automatic calculation updates once underlying data is updated.

Client Onboarding: In order to meet KYC compliance requirements, IBM believes that insurance providers must collect, validate and verify key documents to prove characteristics such as name, address, birth, health and economic status. According to IBM:

“A blockchain network is distributed, so the necessary documentation can be made available to whoever has permissioned access.”

The records are secured with cryptography and linked together, which prevents them from being altered retroactively.

Underwriting: It is a time-consuming process for insurers to evaluate the risks of providing certain clients with a policy. On blockchain, external data can be included to decrease risk liability and provide semi-automatic pricing. This can help to automate and shorten the underwriting process, reducing the cost of operations.

Karthik K, Co-founder & CEO of SkcriptHQ believes that blockchain has been growing as the central repository of truth for many industries. He adds that insurance companies are taking advantage of blockchain as it brings transparent information about all transactions.

Challenges and Risks of Implementation

One challenge when implementing this kind of technologies lies in the code. Can it be guaranteed without bugs and vulnerabilities? Addressing code issues and vulnerabilities can turn out to be a costly expenditure should something drastic arise.

It’s also important that the issues blockchain currently faces — notably with scalability are addressed and adequate technical standards are addressed.

It’s been said time and again that blockchain is still in its infancy phase. When multiple organizations are involved where trust in an issue, it is important to ensure that blockchain can live up to the task while ensuring security, especially long-term.

Blockchain promises to foster innovation and eliminated an outdated system across various sectors. The ease of information sharing, and potential added security through immutable records has the potential to foster positive consumer engagement. By unifying the platform, factors such as fraud, can be mitigated which would allow this industry to thrive.

Do you know of other interesting applications of Blockchain technology in the Insurance Industry? Let us know in the comments below or contact Laura Marissa Cullell at

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