Insurance and Blockchain – Pair Made in Heaven?

Since the first collective funds organized to protect Chinese trading ships, the insurance industry hasn’t changed too much. New processes and models emerged, digital tools appeared, and people started talking about focus on customers. Actually, that’s it. Underwriters are still pretty conservative as they tend to implement innovations slowly. Even cloud databases/processing tools aren’t fully adopted by insurance teams, as for now!

Still, we want to talk about an even more innovative thing – blockchain. This technology disrupts various market sectors right now. But how can it help insurers? What are the benefits and limitations? Is it a good idea to use blockchain at all? Let’s figure out.

Blockchain in Insurance Basics

For the first section, we have a few general points about blockchain as a technology and a platform for insurance solutions. We will review how the system works, how it can help insurers, and which obstacles are on the adoption way now.

Blockchain 101

While there are dozens of definitions, let’s stick to terms based on core features of the reviewed architecture. Blockchain is a distributed ledger that stores and exchanges data. The underlying structure is a chain of subsequently connected blocks that contain encrypted information. Exact copies of this entire chain are stored on machines of all network participants. That’s why it’s almost impossible to modify data without affecting all blocks.

Also, there are three types of blockchains that meet different purposes:

  • Public– decentralized systems that don’t have a single person/entity in charge. They are open to everyone and anonymous but have poor scalability.
  • Private– blockchains combined with traditional centralized governance. They sacrifice transparency to get way better performance.
  • Hybrid– solutions that try to combine private scalability and public accessibility. Their costs are higher, but potential benefits are promising, too.

For underwriters, such technology opens new interaction ways. Information stored in blocks is anonymous, immutable, transparent, and protected by cryptographic algorithms. However, blockchains are relatively expensive in development and maintenance. What’s more important, the world still doesn’t know how to regulate blockchain-powered businesses. Hence, there are both pros and cons.


  • Automated management via smart contracts. These agreements can automate claims, settlements, and policy changes. For instance, smart contracts can trigger payments just after a road accident or adjust coverage during a trip abroad.
  • Digital-first approach to data storing and exchanging. Blockchain exists online, it’s a next-gen version of cloud storage. By keeping insurance-related data in it, companies can eliminate paperwork and double-entries.
  • Faster payments, including cryptocurrency transactions. Initially, the technology was designed for quick and cheap financial operations. Thus, underwriters can accept premiums or pay compensations in cryptocurrency.
  • Higher trust related to immutability and protection. In chains, records can’t be processed backward. It makes such systems useful for sensitive data like financial transactions. Surely, information is encrypted, too.
  • Improved interoperability in different ecosystems. By implementing large-scale blockchains, it becomes possible to directly connect various parties: insurers, hospitals, car services, real estate agencies, customers.


  • Data leaks, hacks, and other blockchain-specific attacks. While these innovative platforms are almost invulnerable to traditional attacks, they have their own flaws. As for now, it’s barely possible to build a 100% protected blockchain.
  • Expensive development, maintenance, and operations. Compared to traditional servers and clouds, distributed ledgers are less cost-efficient. They require smart developers, a lot of investments, and costly security measures.
  • Regulatory issues with national and international authorities. Due to the two previous facts, institutional investors and governments are extremely cautious about blockchains. They want to research everything first.

Core Implementation Areas for Blockchain

As you realize now, blockchain isn’t a magic solution to all insurance problems. It’s a complicated and expensive technology that requires thorough research and careful implementation. One PwC survey reports that 56% of insurance brands admit the importance of technology. Simultaneously, 57% of companies don’t know how to respond to this technology. Well, here are four areas where innovations can help a lot, for your information.

1. Life & Health Insurance

Problem: people often visit different doctors in different institutions. Due to outdated electronic health records, legacy digital healthcare systems, and strict privacy laws, it’s extremely difficult to optimize L&H insurance. Underwriters and clinics can’t share info, track fraud, and eliminate errors. At the end of the day, all parties face time/money losses.

Solution: thanks to immutability, transparency, and encryption, distributed ledgers can change the game. Patients can store their sensitive data inside chains, share it with insurers and doctors, get timely compensations, and be sure that each record is secure. Finally, the information can be anonymized and shared for scientific research.

2. Property & Casualty Insurance

Problem: modern P&C claims management processes are prone to human errors and biases. Core data needed for evaluation is distributed among several parties. Insurers have to gather information, check claims, decide on payments, cooperate with clients and other firms. Most of these processes are digital but still manual!

Solution: blockchains not only collect data to store it under one roof but also enable efficient automation through smart contracts. Based on this approach, a system can automatically track car telematics, file claims in case of any accident, review the conditions, confirm coverage payments, and request an extra manual review if needed.

3. Re-Insurance

Problem: underwriters protect people and businesses from risks. But there are other companies that protect insurers – they can help if a lot of claims come at once. Current processes in re-insurance are complex and cumbersome. Entities should agree on risks, evaluate them manually, sign contracts, and meet all industry standards.

Solution: using shared ledgers, businesses can save tons of time. In such databases, information about risks, premiums, losses, and coverages is available to both parties. Moreover, by adding smart contracts, insurers can automate case evaluations and payments. It’s especially vital for urgent situations like natural disasters or wars.

4. Risk and Fraud Prevention

Problem: fraudulent claims are as old as the insurance industry itself. People want to get some money all the time, so they find new and new ways to cheat on insurers. Destroyed cars, burnt houses, fake injuries, whatever. And companies continue suffering from these frauds because they feature visibility gaps and other errors.

Solution: again, all chain changes are remembered and tracked. It’s impossible to manipulate data, so businesses can easily find any suspicious activity. It also becomes simpler to identify fraudulent patterns thanks to global analysis. Distributed databases eliminate double-bookings, counterfeit ownerships, and unlicensed policies.

The Future of Insurance

Blockchain solutions are attractive thanks to all the hype around. Many businesses start working on them, but the majority fails. The thing is that you should clearly know what do you need and how will you move to the expected results. For some teams, such innovations are must-have. Nevertheless, others can succeed without them.

Talking about insurance and blockchain combination, Diceus experts say that not all underwriters require this technology. To understand if a distributed ledger is a perfect match for your brand, you should analyze the company, the customers, and the market. Start working only if you realize the risks and potential benefits, that’s the golden rule!

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