The blockchain, Bitcoin's underlying technology, is going to change the insurance world. By combining the blockchain and Ethereum, a decentralized platform that runs smart contracts on VM, it is possible to sign a digital and smart contract without the need of a third party and without the need to waste a lot of money. Transparency and decentralization are the key factor for the years 2016 and 2017 about insurances.
Blockchain is a distributed ledger with enormous innovation potential in all areas of financial services. Bank and financial institutions are investing in studying and developing blockchain use cases, they are brainstorming on how to use blockchain technology to take advantages of revenues and costs. The blockchain technology offers potential use cases for insurers by reducing costs and preventing frauds.
By combining the blockchain with Ethereum, we can develop a smart contract, store it forever inside the blockchain and let the nodes evaluate the contract. It is possible to reduce drastically the maintenance costs, the storage costs and the verification costs as all is done by the blockchain technology and Ethereum platform.
The real 2017 challenge is figuring out how the smart contract can automate the subscribing of policies, the validation of claims, and the verification of the contract. A big help is provided by the so-called Oracle, for example by Oraclize, one of the automated tool for oracles.
A simple use case for travel insurances concerns the holidays and weather conditions. The consumer purchase an all-inclusive 7-days holiday's to the moon with the following condition:
- If it rains for 3 or more days, the insurance will pay back half of the holiday's price
- If it rains for the whole holyday's, the insurance will pay back the full price
- If it does not rain, nothing happen
The smart contract includes all the above conditions and inside the "software code" there'are different API calls to free weather services or to Oracles. The smart contract is propagated in the Ethereum network and inside the blockchain. The day after the end of the holidays, the nodes will process the smart contract and refund totally or partially the consumer if it has rained some days.
Another use case is about gambling or betting. I can sign a smart contract that my train will be in late about 10 minutes. The smart contract (through Oracle) will call some free API to check the train delay and eventually unlock the refund.
With blockchain technology, we have a public ledger where we can track everything! For example, we can keep track of:
- Ownership of Paintings
- Ownership of artwork
- Car production line
- Music copyright
The blockchain will change the world!