Blockchain and Insurance

Posted by Mark Johnstone on 9:39 AM on January 18, 2019

The breakneck developments in technology over the past decade have transformed entire industries such as the media, the music industry and taxi services. There has however been little in the way of technological innovation in the vast global insurance sector recently, despite our rapidly changing times.

The big story over the past few years has been blockchain, with it being touted as the revolutionary technology that could potentially revolutionise entire business models. Blockchain is a word that is heavily associated with the volatile rise of cryptocurrencies like bitcoin, but the technology itself promises to act as a platform to a multitude of real-life improvements for many industries.

With blockchain now being adopted by a number of different sectors it is clear that blockchain is no longer hype – it is having real consequences right now.

The insurance industry, though slow off the mark, is now showing increasing interest in blockchain with leading industry figures such as Arif Amiri, Chief Executive Officer of DIFC (Dubai World Insurance Congress) Authority, saying “In the past decade, technological advances from … blockchain have transformed business models in every sector and insurance is no exception.”

A clear sign of the industry’s new focus on the new technology is the formation of the Blockchain Insurance Industry Initiative. Fifteen insurance companies, including industry giants such as Allianz and Zurich, formed the consortium back in late 2016 with the mission of finding out how blockchain’s applications could be used in insurance.

How does it work?

Blockchain is a technology where a ledger is distributed over a network. This means that there is no need for a central authority, as everyone can see one version of the truth. All information is recorded on the blockchain, seen by everyone and cannot be erased or changed.

What are the benefits for the insurance industry?

The applications of blockchain have the potential to revolutionise the insurance industry as it needs the cooperation of many different actors with differing motives. The benefits of blockchain to the insurance industry are effectively the same benefits offered to other sectors: efficiency, trust, privacy, and defence against fraud.

Efficiency savings

Even in this day and age, insurance policies are often processed on contracts written on paper. As a claim can include consumers, insurers, brokers and more parties, there is the increased possibility of human error, misinterpreted policies and misplaced documents. Blockchain technology does away with this inefficiency.

The use of smart contracts (a self-executing contract that carries out the terms between buyer and seller automatically), can also work to provide superior cash and credit management by working out premiums due for example. Insurance claims could also be automated when a condition is triggered by an event, leading to a payment being triggered immediately. It also cuts out the need for monotonous tasks to be performed by humans – saving on staff costs. With the transparency that blockchain offers, underwriters have the confidence to automate a huge percentage of their work, allowing them to dedicate more time to complicated cases.


The finance industry, and by extension the insurance sector, is seen as untrustworthy and opaque by some consumers. This plague of distrust of insurance companies amongst consumers has led to instances of astonishingly low rates of insurance policies taken out in areas such as flood plains or earthquake zones. As blockchain allows insurance companies the ability to be transparent in its work, this as a result leads to greater confidence and therefore trust from its customers.


Blockchain technology offers a version of the truth that is authenticated by its network, leaving a permanent record of transactions. Assuming that customers, insurers and manufacturers co-operate to share their information on the blockchain, the technology has the potential to automatically verify policies, transactions and customers to ensure that any claim is authentic. This greatly weakens the possibility of fraud.


Though privacy might not be the first thing you think of when someone mentions blockchain, the technology can offer this benefit thanks to various cutting-edge cryptography techniques.

For a technology that is defined by its transparency, blockchains with special protocols permit different degrees of confidentiality and anonymity with someone’s personal information while still letting it be used in AI applications.

One technique is referred to as ‘state channels’ and is a hybrid solution that relies on blockchain interactions which start on the blockchain but occur off of it. As the transaction happens off the blockchain, but is eventually stored on the blockchain, it allows providers to keep user information secure and private.

Another method is a type of encryption known as ‘homomorphic encryption’. This is the technique of making calculations on encrypted information without decrypting them first. This allows the maintenance of the information’s security while computations are performed.


As with any new technology there are teething problems that need to be rectified and blockchain is no different. Cybersecurity, despite the aforementioned cryptography techniques, will continue to cause a few concerns in the near future as the technology and its use continue to evolve.

The biggest challenge for the insurance industry when it comes to adopting blockchain, is the insurance industry’s inherent mindset however. The past has shown that it is a conservative sector that often lags behind similar industry’s technological developments. While some companies may choose to be cautious and wait for its rivals to take the first step into the blockchain arena, others will doubtlessly see blockchain as a development that will level the playing field and therefore diminish its current advantage.

Nonetheless, the advantages offered by blockchain are numerous, and it is only a matter of time before blockchain is fully embraced by the insurance industry.

Topics: "Blockchain"

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