Category Archives: technology

The Insurance Blockchain

blockchain

In my pre-academic life, I spent a couple of decades as a technologist, consultant, and entrepreneurial software developer serving the risk management and insurance industry.  To this day, I get excited about cool technologies and their potential impact on the risk and insurance industry.  In other words, I’m a geek.

The latest shiny object for me to fixate on is blockchain technology.  In case you haven’t encountered this term yet, it is a foundational technology underlying the Bitcoin digital currency, and you can get a Blockchain crash course here.  A gross oversimplification of blockchain is to think of it as a decentralized, distributed, secure, database of transactions that eliminates the need for a central authority to verify trust.  Which makes perfect sense when you think of the Bitcoin digital currency that needs an underlying ledger to keep ownership of the digital currency secure and prevent double-spending without any centralized “bank” acting as the common intermediary to all transactions.  But what does blockchain have to do with insurance?

At first glance, one might think that we’re talking about transacting insurance business (i.e., collecting premiums, paying claims) in Bitcoin digital currency.  I attended a RIMS education session on this possibility back in 2015, so it is likely to happen if it isn’t already somewhere.  But the implications of blockchain technology are much, much deeper than mundane Bitcoin transactions. (See how quickly technology evolves?  Bitcoin is already “mundane.”)

Articles and papers discussing various blockchain applications in insurance are beginning to appear.  Blockchain technology may reduce or eliminate claim fraud by allowing insurers to instantly avoid duplication of payouts, and customer service could excel with smart contracts using blockchain technology to speed up claim payouts, or even proactively disbursing funds to repair/replace property that the Internet of Things reports as damaged.  And we’re just scratching the surface.

I am currently reading “The Business Blockchain” by William Mougayar in an attempt to wrap my own head around the possibilities of blockchain technology.  Mr. Mougayar asserts that the evolution of blockchain technology in all business contexts and industries will be as revolutionary as was the advent of the commercialized World Wide Web in the 1990’s.  As I learn more myself, I am entertaining a few intriguing research projects on the use of blockchain technology in risk and insurance.  If Mr. Mougayar is correct, the next 5-10 years are going to be very exciting.