Blockchain Use Cases: Insurance Industry


In this series of articles, we look at different applications of blockchain technology. We have previously highlighted potential benefits of the blockchain for the music industry.  In this latest installment of the series, we will look at the insurance industry.


Not much has changed in the insurance industry since Edward Lloyd started insuring seafaring merchants in the 1600s. On one side of the equation, policyholders wish to protect themselves financially from certain risks. On the other side, investors are willing to take the risk of underwriting insurance policies in the hope of profit. Obviously, there have been modernizations since insurance policies were taken out in London coffee houses, but the industry pretty much remains stuck in the past. A few large companies dominate the market and it is very hard for anyone to take a new product to market. Innovation is not a word usually associated with the insurance industry. Blockchain technology may about to change this.


Process automation is a key advantage of smart contracts and insurance policies may be ideal candidates for this type of automation. Companies, such as Black Insurance, have realized this and are coming up with ways to implement insurance products in smart contracts and automate underwriting and claim processing.

As in the traditional model, funding of insurance products allows investors to underwrite insurance policies. Investment in tokenized assets is a key feature provided by blockchain technology. It is therefore relatively trivial to implement tokens that represent securities in insurance syndicates, with the goal of backing up insurance products. This type of token clearly represents an investment with an expectation of profit and should, therefore, be classified as a security token, accessible to accredited investors only. This does not mean insurance platforms cannot also provide a utility token for the general public that can be used to buy insurance policies and interact with smart contracts.

Once insurance policies are expressed in the form of smart contracts, claim processing can also be automated. In fact, policies can be integrated with external data feeds to verify claim validity. For instance, a late delivery claim on a container shipment insurance could be triggered by an integrated shipping platform.

Claims and underwriting automation through smart contracts can speed up processes and time to market of insurance products. Integration with other systems can reduce insurance fraud.


The insurance industry does not only benefit from automation provided by smart contracts. The transparency and openness provided by blockchain technology also provides advantages to the partners involved.

Since the transactions resulting from a smart contract’s execution are transparent, insurance end-users can trust the correct and fair execution of their claims. On the other side, investors also benefit from the added transparency, gaining insights into the use of their funds and confidence in claims processing.

An Ideal Use Case

In many ways, the insurance industry is an ideal application for blockchain technology. This traditional industry, which is often accused of non-transparency, can improve its reputation through the blockchain’s open and trustless nature. Furthermore, smart contract automation can provide much-needed optimizations.



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Dr. Stefan Beyer is editor-at-large at BlockTelegraph and a Blockchain consultant and smart contract auditor. He graduated from the University of Manchester in 2001 with a degree in Computer Science and obtained a Ph.D. in 2004 from the same university with the title “Dynamic Configuration of Embedded Operating Systems”. Since then he has worked in computer science research in distributed systems, fault tolerance, ubiquitous computing and cyber security. He is currently working as head of research and development for a medium-sized cyber security company in Spain.


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