Other parts of this series:
Looking to the future, blockchain won’t simply be about increasing automation and efficiency. Blockchain—along with artificial intelligence, big data and the Internet of Things—could help P&C insurers to reinvent their businesses just as new competitors and changing consumer behavior threaten their traditional markets.
Blockchain-based ecosystems will forge connections between insurers and different players in the value chain to create radical new products and heavily differentiated customer experiences. This can equip insurers to better compete in a market where risk premiums may shrink as ownership of assets such as vehicles becomes less common and as connected devices and big data deliver improved risk monitoring, accident prevention, early loss detection, and preventive maintenance.
Blockchain could power new business models based on personalized, real-time assessment of risk rather than using historical data and averaged pricing. It could, for example, enable P&C insurers to build more sophisticated pay-as-you-go and usage-based insurance models in partnerships with auto manufacturers or makers of smart home devices.
Working with their partners, insurers can evolve from simply providing cover to becoming valued partners that help their customers monitor, mitigate and avoid risk. Instant exchange of data between parties in the ecosystem will empower insurers to better understand risks, enhance customer service and satisfaction, and prevent unnecessary losses.
Already, we have seen some interesting experiments in this regard—SafeShare, for example, has launched a blockchain insurance product to protect sharing economy platforms. And last year, the InsurETH team showed a prototype for an automated flight insurance product that uses a smart contract and public flight data to provide cover for cancelled or delayed flights in a provably honest manner.
Here are some examples of blockchain ecosystems we may see in the future:
Peer-to-peer insurance: Following the success of peer-to-peer lending, we could see the rise of peer-to-peer insurance. The blockchain could underpin a relationship of trust between individuals seeking insurance and others willing to insure them. A peer-to-peer exchange could provide the technology needed to manage underwriting, premium collection and claims as a pay-for-use service.
Disintermediation: Visibility of balances, transactions and asset ownership might mean that intermediaries can be cut out of the insurance process, with the resulting efficiencies passed on to the insured and the insurer. For example, pools of customers with similar risk types could come together to self-insure, or any company or individual could offer to insure a piece of the risk.
Smart adjusting policies: Blockchain and smart-contract-powered policies could proactively adjust coverage, limits and deductibles based on asset valuation, driving behavior, miles driven, location, time-of-day and telematics data.
Self-insurance: Smart sensors could track new assets to be insured under an existing policy, or changes in geographic area. They could automatically place insurance cover and adjust premiums according to the rules of a smart contract.
Pay-as-you-go: Smart sensors detect when a vehicle or other asset is in use and automatically place and price coverage based on factors such as time of day, location, asset status and information about the insured’s claims record.
Smart device insurance add-on: P&C insurerscould createan insurance-as-a-service offering to be incorporated with smart devices such as drones and robotics. Policies can be bundled with the core product or offered upon smart device registration or activation.
My final post in this series will wrap up with some ideas about where P&C insurers can get started with an emerging technology as potentially disruptive as blockchain.