Blockchain’s ability to create trust in a trustless ecosystem through the use of public ledgers and fortified cybersecurity protocols has positive implications for the insurance industry's future growth. Along with artificial intelligence and big data, blockchain is poised to make headway in InsurTech via three unique features in particular.

Smart Contracts

Smart contracts enable blockchain users to transparently transfer anything of value without the interference of a middleman. Like physical contracts, smart contracts stipulate the rules between two parties. Unlike physical contracts, smart contracts can track insurance claims and hold both parties accountable.

Insurance policies could be written as coded, decentralized smart contracts in which an individual agrees to pay the insurance company money in return for the company's promise to help cover that person's future medical costs. Blockchain smart contracts will create immutable data based on an insurance policy owner’s records that can immediately accept or refute any insurance claims made to the company.

If any false or fraudulent claims are made by the policy owner (or if an insurance company no longer agrees to cover a condition previously agreed upon), a smart contract will immediately dissolve and the premium payments will transfer back to the individual. The process creates a sense of mutual trust between the two parties for two reasons: all data is transparently displayed, and the slightest contractual deviation results in restitution to the harmed party.

Advanced Automation

Because the insurance ecosystem contains millions of insurers, healthcare providers and patients, it’s easy for the industry to get bogged down by money- and time-wasting inefficiency stemming from billions of forms, human error and poor communication between parties.

Digital ledger systems like blockchain can help automate outdated processes, save billions of hours of paperwork each year and reduce human error because all forms and data are safely stored along the chain.

Communication between important parties in an insurance claim can also be improved through distributed ledger technology. If stored on a blockchain, a patient’s medical history can be safely viewed by doctors and insurers to determine correct policies and procedures going forward.

Cyber Security Stronghold

Blockchain's ability to safeguard sensitive information is especially enticing to an industry that heavily relies on data gleaned from being at the intersection of health, work and personal life.

Blockchain’s ledgers are decentralized, so they can't be corrupted or manipulated by one authority. Instead, all data is chronologically timestamped to ensure a clear recording of events.

And while blockchain data is encrypted, it's also completely transparent to members (nodes) on a chain — meaning that all nodes can view the actions of an individual whose true identity remains hidden. This system enables blockchains to quickly suss out any unusual behavior and take care of problems before they become major issues.

The insurance companies below lead the pack in implementing ledger technology.