For years, the traditional insurance business model has proven to be a surprisingly resilient one. However, traditional insurance is beginning to feel the digital effect as emerging technologies change the way consumers interact with businesses and how products and services are delivered. One of those emerging technologies is blockchain. Due to implementation strategies by companies such as IBM and Enterprise, blockchain has begun to push the boundaries of the insurance experience. The goal of IBM’s blockchain network is to automate the underwriting and claims settlement process, while Enterprise has developed smart contracts between blockchain accounts to make transactions faster and more secure.


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Blockchain technology is a distributed and decentralized public ledger that is the record-keeping technology behind bitcoin. Blockchain transactions are free to use and have the potential to completely change the way insurance is contracted. Blockchain optimizes efficiency, security and transparency for the entire insurance industry, using public ledgers and fortified cybersecurity protocol. Although blockchain implementation in the insurance industry is still in its early years, many sectors already utilize this technology, including (but not limited to) companies providing and trading renters, homeowners, unemployment and travel insurance.

How does blockchain technology work?

We love the way Block Geeks explain how blockchain technology works – “Picture a spreadsheet that is duplicated thousands of times across a network of computers. Then imagine that this network is designed to regularly update this spreadsheet and you have a basic understanding of the blockchain.”

Blocks on the blockchain are comprised of digital pieces of information that exist in three parts. The first is stored information about transactions like date, time and dollar amount of a purchase. The second is stored information about who is participating in those transactions. The third is stored information that distinguishes one block from all other blocks.

When a transaction occurs, the process generally includes:

  1. Creating a new block to represent the transaction
  2. Verifying the block through every participant of the network
  3. Attaching cryptocurrency or another “proof of work” signifier to the block
  4. Adding the block to the existing chain
  5. Updating the network and finalizing the transaction

Because blockchain databases are essentially large storage points for recorded information, blockchain technology opens the door for improved processes to many industries, including entertainment, healthcare and insurance. One of its primary use cases involves automating operations such as document transfers, contract term negotiations and cybersecurity. For instance, the insurtech company Ryskex helps provide insurers an easier way to assess and handle risks accurately through its blockchain-based platform.

According to Gartner, blockchain is estimated to be more heavily adopted by 2023 and lead to $3.1 trillion in new business value by 2030.

Blockchain technology meets the insurance industry

The insurance industry has been around for centuries, but unfortunately, many of its processes are outdated. Many policies are still processed on paper contracts, consumers still call by phone to purchase new policies, the list goes on.

While these processes work, the potential for human error and misuse could lead to risks where information can be lost, tampered with and misinterpreted. In fact, the Coalition Against Insurance Fraud reported that fraud accounts for 10% of all property and casualty insurance losses and results in at least $80 billion stolen from American consumers annually. Because of this, there is much left to be desired in terms of security, efficiency and customer satisfaction, which are issues that blockchain could help solve.

While blockchain is the hopeful solution, it is still likely to come with its own set of obstacles. Insurance companies must overcome regulatory and legal hurdles before fully embracing blockchain technology. There are a number of blockchain features that could be inconsistent with current insurance laws. For example, personal customer data and their policy information residing on blockchain must comply with existing privacy and data protection regulations. In addition, decentralization strengthens information sharing and reduces advantages that information asymmetry provides. This provides new challenges for management in pricing, product development, claims services and more.

Insurance applications for blockchain technology

Property & casualty insurance

Property and casualty insurance consists primarily of auto, commercial and home insurance. Net premiums written for this sector totaled $1.32 trillion in 2019. Processing claims requires significant manual entry, which leaves room for human error. Blockchain technology could make claims processes three times faster and five times cheaper using blockchain technology. By using shared ledgers and smart contracts (software that checks for certain transactions in the network and automatically executes actions based on pre-specified conditions being met) to issue insurance policies, the claims and payment processes can be automated to create more efficiency and accuracy. Smart contracts have the ability to turn paper contracts into programmable code that helps automate claims processing.

Fraud detection & risk prevention

According to the FBI, the cost of insurance fraud in the U.S. is more than $40 billion a year. The outdated nature of the insurance industry’s processes leaves room for error and potential fraud. To combat this, insurance companies could store claims information on a ledger that would help them communicate and identify suspicious behavior.

One start-up currently working on this is Etherisc, an insurtech company that uses blockchain’s validation and user transparency to automate the claims process. Using multiple time-stamped points of comparison, like weather reports, flight delays, satellite images and more, Etherisc hopes to prevent insurance fraud with its simpler means of claims verification to make fair payouts.

The impact of blockchain technology

Historically, the insurance industry has been slow to embrace new, more efficient processes. Blockchain can introduce enormous benefits to both companies and their customers, but there are certainly limitations.


  • Enhances efficiency – Because so many processes are manual and time-consuming, blockchain can streamline paperwork and reconciliation for insurance contracts.
  • Increases trust – Cryptography in blockchain ensures that transactions are secure, authenticated and verifiable, ensuring customer privacy.
  • Claims processing – Blockchain enables real-time data collection and analysis, which could significantly speed up claims processing and payouts.
  • Smart contracts – These programmable contracts contain logic that is automatically executed when predefined conditions are met. “Because these if/then contracts reduce paperwork on the back end, they will become the insurance equivalent of no-frills airlines,” said Jeff Stollman, Principal Consultant at Rocky Mountain Technical Marketing. “They will be cheap to administer and less costly than more robust policies, and payment can be immediate.”


  • Prone to cyber attacks – The global blockchain market is expected to be worth $20 billion in the year 2024. With so many new users every day, blockchain is becoming more prone to cyber attacks.
  • Loss of integrity of data – Integrity of data must consider the validity of every transaction, which brings fraudulent insurance transactions into question. Blockchain must protect against fraudulent activity to ensure integrity of data.
  • Cost of operations – As blockchain becomes more and more popular, it will become more expensive for insurance companies to adopt this new technology into everyday processes.
  • Blockchain privacy – In cryptocurrency (like bitcoin), blockchain is publicly available, with means every transaction can be traced back to its original block. That information can potentially be accessed by criminals looking to exploit that information.

Moving towards a blockchain-powered insurance industry

While blockchain shows promise in improving the insurance industry from every angle, the technology is still in its infancy. There is so much unknown about the true power of this technology. However, there are some start-up companies leading the way with blockchain, exploring the benefits to how this tech could improve business processes and customer satisfaction in the insurance industry.

Fidentiax, a blockchain market for trading insurance policies, launched its digital ledger product for insurance policies in 2018. Named ISLEY, Fidentiax describes it as being consumers’ “insurance buddy,” and it allows users to store, view and receive alerts for their insurance portfolios. Policyholders’ portfolios can even be shared with designated loved ones through the ledger to assist in beneficiary payouts after death.

Lemonade combines distributed ledger technology with artificial intelligence to offer insurance at low prices. For instance, its renters insurance and term life policies start at under $10 per month. According to Lemonade, their business model takes a fixed fee from each monthly payment, then allocates the rest towards future claims. When a claim is made, the blockchain’s smart contracts verify the loss immediately so the customer gets paid quickly.

While there are first-movers paving the way for blockchain in the insurance industry, there are still hurdles stopping companies from fully embracing this technology. Insurance companies must align around standards, processes, regulatory and legal frameworks to implement blockchain.

What is next for the future of insurance?

While blockchain can improve the industry in accuracy, efficiency, privacy and more, it is incredibly important to understand that every single insurance company that embraces blockchain must agree to operate under ethical standards. Standards and processes must be aligned in order for blockchain to provide insurers with better tools for collaborating, sharing data, and making insurance processes less of a headache for customers.

Because the industry has high privacy and security concerns, blockchain must be developed further to meet the standards of insurance companies before it’s really feasible. Also, insurance companies must provide clear regulations frameworks in order to safely utilize blockchain technology. Once these needs are met, blockchain has the ability to transform the insurance industry for companies and their customers.