The use of smart contracts has the potential to significantly reduce the waiting time, associated costs and element of human error in the processing of insurance claims. The theory being that self-executing contracts can handle and process real-time information and automate payouts far more efficiently. So where and how are smart contracts being utilised?
When disaster strikes
The provision of parametric insurance is one sector that would be perfectly suited by the integration of smart contracts, yet it has been slow to adopt the blockchain-based technology. One application that is gathering force however, is in the provision of natural disaster insurance. Recently, insurtech Jumpstart launched its new disaster insurance product that uses real-time data to provide automated payouts initiated by text. The product is triggered by earthquakes registering a predetermined intensity, meaning that the smart contract underlying the policy determines payouts rather than subjective assessment by the policy makers. The product has been launched in California with hopes to expand.
Switzerland based blockchain start-up Etherisc is also breaking into the sector after raising USD 3.6 million in an ICO. They are currently working with Puerto Rican start -up HurricaneGuard to launch hurricane insurance based on a smart contract self-executing once wind speeds exceed a predetermined level.
A product has also been designed by Etherisc that insures crops against droughts and floods. Again, the service will be based on a smart contract that self-executes and automatically distributes payments once the predetermined level of drought or flooding has been reported by government agencies.
Smart contract developments have spread across several sectors, including flight delays. Fizzy, an AXA Group-supported insurer, has policies offered on Ethereum-based smart contracts. The service indemnifies customers if flights are delayed by two hours or more and is expected to service 80% of worldwide flights by the end of December 2018.
An exciting new development in medtech has also just been tested in Singapore, with the LumenLab innovation centre taking health insurance to the app store. The Vitana app will be linked directly to the patients’ medical records, and payouts will be automated upon diagnosis. Currently testing is limited to gestational diabetes in Singapore.
This variety of innovative smart contract applications show that blockchain-based solutions are ready to shake up the parametric insurance industry, and it will be exciting to see what smart contracts insure next.
by Sam Hodder, Research Analyst