Law firm Pinsent Masons and Applied Blockchain have launched a research highlighting the opportunities and risks for engaging in blockchain in the insurance sector.

Blockchain has been the buzzword in the fintech community for some time, with a lot of the attention focused on how blockchain technology can be used to enable «smart contracts».

Pinsent Masons and Applied Blockchain, a blockchain applications development company, have co-authored the research entitled «Smart Insurance Contracts» to examine in more detail the potential applications for blockchain in the insurance sector.

Real Benefits to Insurance Industry

«Smart contracts can offer real benefits to the insurance industry including simplification, automation, increased standardisation and electronic execution,» said Tim Roughton, Partner at Pinsent Masons.

The term smart contract has no settled definition and there are many and varied potential use cases. Consortia such as B3i are now forming in the insurance sector to explore opportunities for the application of blockchain and distributed ledger technology.

Reducing Fraud Key Concern

There are also a number of features of the insurance sector that align to the features of blockchain:

  • Insurance is heavily reliant on documentation, data analysis and databases - inefficient solutions are currently being used
  • Insurance involves many parties/actors - distributed networks could make sense in this context
  • Insurance is a heavily intermediated industry; intermediaries add cost and complexity - the removal of ‘central authority' can reduce costs
  • Customer onboarding issues remain a concern for insurers - authentication/verification through the blockchain can provide a way forward
  • Reducing fraud is a key concern for insurers – the blockchain promises immutable records and tracking

«Smart contracts are so powerful because of their flexibility and translate business process into computational process, greatly improving operational efficiency,» added Peter Bidewell, Chief Marketing Officer at Applied Blockchain.