The advent of blockchain technology has led to speculation about how it can revolutionize practically every industry. Sometimes this speculation seems far-fetched, as though developers are riding the wave of crypto hype to make their products and services seem more appealing — even when there seems no logical reason to utilize DLT — but there are many industries in which the hype seems well placed. Insurance is one of these industries.
Blockchain and trust
Fraud is a huge problem in the world of insurance and, therefore, trust is a huge part of the industry. Fraudulent claims are costly, but blockchain technology has built-in features to ensure trust between insurer and client. This is because all transactions on the blockchain are verified by the network and because all blocks contain a date and time stamp meaning the same transaction can’t be made twice. However, this isn’t what gives blockchain technology the potential to disrupt the world of insurance. To speculate on its potential, we must acknowledge DLT’s ability to transfer and store data securely.
Blockchain technology has provided a means to transfer and share assets while providing an immutable record of those transactions. This does not only apply to currencies, it also applies to our data, and increasingly, people are starting to wake up and realize that their data has value. This is also true of developers and, as a result, we’re seeing a massive rise in the number of projects that are attempting to provide the best solution for gathering, storing, and transferring valuable data.
Data and Insurance
We’ll use car insurance as an example, but you can extrapolate and apply it to practically anything.
There are many factors that affect the price of an insurance quote — the car you drive, where you live, your age, and far too many others to list here. Many of these factors have no conclusive bearing on your ability to drive safely but will cost you all the same. This is because insurance companies are gambling against their clients need to make a claim. A lack of focused data means that young drivers can face high premiums simply because they’re inexperienced even though they may follow the laws of the road better than an older driver with a lower premium.
These problems haven’t gone unnoticed by developers and there are several projects looking for solutions. VINchain, for example, although primarily concerned with providing accurate automobile history, believes that insurance quotes can be lowered by utilizing a combination of telematics and DLT.
Basically, it works like this, an OBD (On Board Diagnostics) device is fitted to the vehicle. Once fitted, it can collect and transmit live driving data (including speed, location, and braking frequency). This means that a driver’s habits can be documented, making it easier to assess what kind of driver she is and how well she drives. If this data was shared on the blockchain, it would be an indispensable source of reliable information, and insurers would be able to assess customers accordingly reward good drivers with lower insurance rates.
As with other industries, the ability to draw up smart contracts also makes the blockchain an ideal venue for insurers. In some cases, there may be no need to waste time and resources by having various parties meet and analyze data if it can be done reliably on the blockchain.
For the last decade, the mainstream media has focused its talk of DLT on the discussion of bitcoin’s price. However, with governments beginning to realize the value of blockchain, it won’t be long before the underlying technology becomes a point of everyday discussion. It is even possible that this industry could lead the drive to mass adoption as there a few better incentives than saving people money.
Michael is an English and Creative writing graduate of Liverpool John Moore’s University, a former editor of several magazines, and a crypto-currency enthusiast. He is mostly interested in crypto-legislation and the potential of decentralized technology to change the world.