Blockchain in Insurance: What to Expect?

A security shield with a distributed network on a city background

Blockchain is bound and determined to transform the insurance industry and create better products and markets. The technology has the potential to bring about substantial gains, reduce costs, enhance transparency, comply with regulatory requirements, and address many other industry issues.

Over the years, the conventional insurance business model has been viewed as astonishingly resilient. But even insurance is starting to feel the influence of digital technologies, which are capable of transforming the way consumers interact with businesses and how different services are provided.

There’s a belief that the global insurance industry falls behind other financial service sectors and needs to do something to improve efficiency and transparency. On top of this, the industry is facing growing concerns about fraud, cybersecurity, and human error.

Good old blockchain (though it’s not that old) knows how to tackle all these and many other related issues. It can make insurance better, faster, and cheaper by enhancing many aspects of the industry including fraud prevention, claims management, and consumer privacy. This can result in lower prices and a better experience for customers.

As well as this, it’s worth noting that blockchain transactions are free to use and can radically change the way insurance is contracted. With the help of public ledgers and cybersecurity protocols, blockchain can optimize the security, efficiency, and transparency of the entire insurance industry.

Read on to find out more about blockchain in insurance, how distributed ledger technology (DLT) manages to disrupt the industry, and what blockchain insurance use cases and applications already exist.

Overview of blockchain in the insurance industry

The insurance industry with its extremely complicated processes could be a major beneficiary of blockchain.

Blockchain can assist the insurance industry in transforming a number of operations. It offers fast verifiable data exchanges as well as visibility for all parties and supports all transactions with security and trust. It also removes intermediaries and has the capacity to upend the insurance value chain. The key transformations blockchain could bring to the insurance industry are as follows:

  • Development and acceleration of new products and markets
  • Totally new approaches to underwriting, contracts, and claims management via the combination of smart contracts and the Internet of Things (IoT)
  • Complete revision of insurance agreement procedure
  • Brand new reinsurance approaches, internal reinsurance via smart contracts in particular
  • Major transformation of asset management with automated settlement and delivery of intangibles

Blockchain in insurance can help reduce the costs of acquisition, management, documentation, and compliance. New players will be able to easily enter the insurance market, and new markets will emerge in a number of countries. Just as importantly, thanks to these and the many other substantial benefits of blockchain, customer satisfaction is guaranteed.

What role do insurers play as intermediaries?

People make deals on cars background

Intermediaries play a key role in the insurance industry. For example, if your car were sideswiped by another car, the damage could be covered by the other party’s insurance policy. However, the process can be very lengthy. You’ll have to deal with witnesses, adjusters, repair shops, etc., and it may take a lot of phone calls, hours, and nerves before the claim is finally (and not always successfully) processed.

Processing a single claim needs complex coordination between different participants, who may not even know one another. These counterparties are unlikely to trust each other as they all have opposing financial incentives. In cases like this, insurers enter the stage to offer their valuable services. They normally act as trusted intermediaries who are able to coordinate the process with all parties involved. They’re responsible for getting the damage repaired and ensuring that all accounts are settled.

What are the pitfalls?

The problem is, however, that insurers themselves can add some friction and thwart the smooth flow of the whole process. The insurance claim on your car can be incredibly long-drawn-out, partly because of the inefficient use of intermediaries. Instead of tackling the main issues (repairing the car itself), you’ll have to call or message your intermediaries to get different authorizations. While intermediaries are indeed helpful, they present quite a number of inefficiencies and additional costs that may cause a delay in the workflow.

Furthermore, it can happen that insurance customers are not really into the idea of interacting with insurance companies, as they have to deal with numerous paper forms when applying for a policy or submitting a claim.

Insurance companies themselves have to handle the high costs of managing and servicing policies. These costs comprise claims administration, verification of information, tons of paperwork, and so on. This consequently results in higher premiums paid by customers.

Can blockchain be an alternative to intermediaries?

Considering the challenges outlined above, it’s quite logical to look for another more efficient, paper-free, and less time-consuming method of settling claims. This is when blockchain comes to the forefront to help reduce reliance on all the intermediaries involved in the claim.

Blockchain technology relies on cryptographically secure protocols that allow counterparties to safely carry out transactions without any intermediaries. Once all members in the claims process have access to a copy of the blockchain ledger, they can securely share the required authorizations and instructions.

Here are several other advantages that blockchain has over intermediaries.

Decentralized trust

As a rule, the parties involved use secure and safe blockchain applications because they can trust the data and transactions recorded on an electronic ledger. This ledger is then distributed and each person will have access to a copy. Thanks to its built-in cryptographic techniques, you can be confident that all copies of the blockchain ledger are in agreement and totally safe.

Asset tracking

Bitcoin has undoubtedly paved the way for broader usage of blockchain in the transaction of various assets, eliminating the need to turn to intermediaries for help.

For instance, real estate assets need the involvement of local governments, stocks require brokerages, and health records are managed by hospitals. Throughout their lifecycles, all of these and other assets can be recorded, tracked, and transacted on a blockchain ledger. The major benefit is that you won’t have to employ a central authority to act as an intermediary. The consensus process will ensure the security and validity of all transactions. This is especially valuable for complicated workflows that are common in insurance.

This blockchain solution guarantees the safety and security of the most critical assets

Identity management

Identity used to be managed by centralized authorities such as governments and even influential and powerful online service providers. Blockchain has made it possible for individuals and organizations to maintain control over their own identities and related profile information. Prominent blockchain insurance projects like uPort and Sovrin have introduced the so-called self-governing identity (SGI). SGI is certain to relieve insurers of responsibility and minimize the risk of identity theft and fraudulent claims.

Why use blockchain for insurance?

A person with an umbrella and insurance policy

Blockchain offers insurance a range of benefits that will enable the industry to become more competitive. As of today, blockchain insurance startups and companies all over the world are exploring blockchain insurance applications at full throttle, and are demonstrating how the technology serves the insurance industry.

Enhanced efficiency

Sometimes people are not satisfied with their insurance companies and wish to switch them. But changing an insurance company has always been difficult and tiresome. Customers also run the risk of losing control over their data.

Luckily, blockchain successfully tackles this issue. The DLT drives total security of information and efficiency of operations. It’s worth noting that an individual will have complete control over their personal data while verification is registered on the blockchain.

Increased trust

The financial services industry is experiencing a crisis of trust. The significant cost and inefficiency of operations, as well as lack of trust, lead to extremely high levels of underinsurance. For instance, only about 17% of California households have earthquake insurance, but the likelihood of suffering from losses brought about by an earthquake is high. With the implementation of blockchain, increased trust is guaranteed, as the technology puts transparency first.

Cost savings

By automating almost all insurance processes, blockchain can greatly contribute to reducing the costs of insurance services. These processes comprise verification of claims and policyholder identity, contract validation, etc. So it’s achievable to reduce administrative costs for insurance companies as well.

Consumer privacy

Blockchain in insurance is also used for identity verification. This allows health or other personal data to be stored on a user’s personal device. Blockchain shows who was trying to gain access to the data, and when. This blockchain capability is especially useful for credit scores as well as insurance credit scores, as it can contribute to the reduction of the risk of personal data access by a malicious party.

Smart contracts for insurance processing

Smart contracts are self-executing blockchain programs. In insurance, they’re used for the autonomous execution of underwriting, issuance, claims, verification, and settlement processes. Smart contracts are becoming very widely used in the insurance industry because of their capacity to boost efficiency and reduce the number of clerical errors.

Take a look at this blockchain app development platform powered by smart contracts

Internet of Things (IoT) self-insurance

Nowadays smart devices and property items that are aware of their own state can easily interact with smart contracts to purchase their own insurance or even file claims as established by their sensors. For example, present-day refrigerators can inform homeowners when the water filter needs changing. Similarly, smart devices and property items can sound alerts when their warranties expire and need renewal, and sometimes they can even renew them automatically.

What blockchain insurance use cases exist?

A person analyzing successful blockchain insurance use cases

According to the Accenture Technology Vision survey, about 80% of insurance companies have stated that they implemented or were planning to implement blockchain in different insurance processes. It’s chiefly because the distributed ledger technology can be used in various aspects of insurance. Some of these are described below.

Asset tracking and proof of ownership

Insurance companies are responsible for determining ownership of the insured property and tracking transfer of ownership.

Blockchain distributed ledgers can record ownership information for homes, automobiles, etc. Insurers, in their turn, can track all the details as well as the transaction history of any asset of value.

Reinsurance and shared risk

When physical assets are tracked as digital tokens, insurance companies are able to pool or distribute the risk in the same way that securities are managed in financial applications.

To deal with some of the sector’s issues, the Blockchain Insurance Industry Initiative (B3i) was introduced. B3i is 100% owned by 21 insurance market participants globally. More than 40 companies are involved in this initiative and they act as shareholders, customers, and community members. The aim of B3i is to ensure the delivery of the best insurance solutions for end consumers by providing faster access to insurance with fewer administrative costs.

Blockchain title insurance

The aim of title insurance is to cover losses if there’s a flaw in the title and/or any other related litigation. Therefore, lenders, as well as cash buyers, need title insurance. Title insurance underwriters generally share policy information between themselves. Blockchain platforms allow the exchange of previous title insurance policies between underwriters who participate in the system. What’s more, by dint of blockchain ledgers, property ownership records are trustworthy and tamperproof, and this significantly decreases the likelihood of any errors or fraud.

Peer-to-peer insurance

The new peer-to-peer insurance (or P2P insurance) model uses a digital wallet. Every member is supposed to put their premium into an escrow-type account, which will be used for claims payouts. This model allows all members to carry an exposure not greater than the sum that they put into their digital wallets. All payments in P2P insurance are made with Bitcoin, thus reducing transaction costs. Teambrella, for example, is said to be the first P2P insurer that utilizes this Bitcoin-based model. Its users have control over different insurance aspects including premiums, claims, and reimbursements.


Microinsurance provides coverage for low-income households or individuals with little savings. There are also some low-value or exotic products that sometimes are too expensive for coverage by conventional insurance policy processing. In cases like these, blockchain automation can be a smart and efficient way of reaching untapped markets as well as insuring assets that would otherwise not be worth insuring.

Claims management

A person working on a laptop next to a shield icon and insurance policy

Both the insured and the insurer face issues that blockchain and smart contracts can easily deal with. Insured individuals consider insurance contracts long and even confusing. Insurance companies, in their turn, are obliged to battle an extraordinary amount of fraud at various levels.

However, thanks to blockchain and smart contracts, both parties will benefit from managing claims in a fast and transparent way. The whole process begins with recording and verifying contracts on blockchain. Once the claim is submitted, blockchain ensures that only valid claims are paid. The network is also aware of whether one or many claims for the same accident are submitted. If all the criteria and requirements are met, blockchain triggers the payment of the claim without any third-party intervention, thus enhancing the speed of resolution of claims.

Fraud prevention

The insurance industry is said to lose over US$ 80 billion annually due to fraud. As a result, insurance companies have turned to blockchain, which can accurately detect and prevent any fraudulent activities. Validation lies at the core of the DLT’s decentralized repository and its historical record that can verify claims, policies, and transactions for authenticity. By utilizing this kind of synergy of operations, insurance agencies will save a lot of money.

Proof of insurance

Traditional certificates of insurance have always been manual and paper-based. However, by creating a blockchain digital version of a certificate, it’ll be possible to speed up some business functions such as hiring contractors. Besides, thanks to the digitization of policy information, a number of processes will be streamlined, and customers will be able to focus on their core competencies.

Travel insurance

Flight delays, for example, can be extremely frustrating for all parties involved. The strenuous process that policyholders have to go through just to make a claim can be even more infuriating and exhausting. However, blockchain can ease the whole procedure and allow customers to make claims for flight delays and receive compensation quickly.

Health insurance

Health and life insurers have taken notice of blockchain too. They can use blockchain to improve the way they keep records, execute transactions, and much more. Blockchain allows for faster, more accurate, and secure sharing of medical data between healthcare providers and insurers. This will lead to faster health insurance processing and lower health insurance expenses for customers.

Companies that implement blockchain in insurance

A person analyzing insurance market backed by blockchain

Given the boons and opportunities that blockchain provides, it’s quite reasonable to assume that insurance companies and the insured themselves would love to enjoy the privileges of this smart technology. So, it comes as no surprise that today more and more companies worldwide are embracing blockchain to streamline their processes and address their challenges.


Based in Munich, Etherisc majors in creating decentralized, blockchain-based applications for different markets within the insurance industry including flight delay insurance, hurricane protection, crypto wallet insurance, crop insurance, health insurance, etc. Etherisc widely uses ledger technology in order to reduce various inefficiencies, especially high processing fees as well as lengthy claim-processing times.

Among the most prominent of Etherisc’s blockchain insurance use cases is its crop insurance application, thanks to which farmers are able to identify land, crop, and other losses due to weather. Another application by Etherisc insures its users against potential crypto wallet hacking.


FidentiaX is a Singapore-based marketplace for tradeable insurance policies. FidentiaX’s users can purchase and sell their insurance policies on a specially designed blockchain, which takes the existing policies and enters them into the encrypted database. Users can easily buy policies from others and find all the insurance data in one place.

FidentiaX has also developed ISLEY, a blockchain-powered digital ledger for insurance policies. Thanks to ISLEY, customers are able to get a detailed overview of their insurance policies, receive notifications about their premiums, and view an immutable record of their policy history.


Lemonade totally upends the traditional insurance model. This New York-based company applies artificial intelligence (AI) and blockchain to offer insurance to renters and homeowners.

Lemonade widely utilizes smart contracts in its work. Its business model charges a monthly fixed fee and allocates the rest of the sum to future claims. Once a claim is made, smart contracts instantly attempt to verify the loss so that a customer can get paid quickly. If a claim has been approved, Lemonade’s AI and blockchain make the payment straight away.

Blue Cross

Hong Kong insurer Blue Cross utilizes blockchain technology with the aim of accelerating medical insurance claims processing and preventing fraud. The platform is built on Hyperledger and is owned by the Bank of East Asia.

This blockchain platform verifies claims data in real time, which greatly contributes to fraud risk reduction (risk from duplicate claims filing, for instance). Besides, the Blue Cross platform also eliminates the need to reconcile claims data between various parties including insurers and medical service providers.


Launched in 2018, Insurwave is a blockchain-based marine hull insurance platform and is a collaboration among a number of outstanding companies including Ernst & Young, Guardtime, Maersk, Microsoft, and ACORD. It’s built on R3’s Corda platform.

Insurwave offers real-time insights into the location and condition of ships as well as safety factors that can be accessed by both insurers and customers. If a ship enters a high-risk area, Insurwave immediately enters this information into underwriting and pricing calculations. An immutable audit trail for ship-specific information considerably eases all the related calculations, provides accurate pricing, and accelerates underwriting. Insurers, in their turn, can better account for ship-specific risks.

The future of blockchain in insurance

Even though blockchain demonstrates great potential to enhance the insurance industry, the full potential of the technology is yet to be discovered.

Given that the insurance industry has paramount privacy and security concerns, blockchain needs to be developed further to comply with all the standards of insurance companies before it’s really feasible. In addition, insurance companies need to provide clear and unambiguous regulation frameworks to safely use blockchain technology. If these requirements are met, blockchain has the ability to disrupt the industry and benefit both insurance companies and their customers.

Anyway, it’s true to admit that even now blockchain can improve the insurance industry from every angle. The DLT can easily deal with decentralized trust, asset tracking, identity management, and so on. As well as this, fraud prevention, considerable cost savings, consumer privacy, and increased trust are all guaranteed. This makes it quite obvious that blockchain is the future of insurance and its adoption offers long-term gains.

PixelPlex has ample capability to design blockchain solutions that will be a natural fit for the insurance industry. Once you’re ready to trust the development process to our professional team, you can be sure that you’ll get the best results and experience possible.


Kira Belova

Technical Writer

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