How Blockchain is Transforming the Insurance Industry

The primary advantage of blockchain is that it fosters trust among parties who share information.

Fremont, CA: Blockchain is still a hot topic in the business world. Many people have heard of blockchain but may not understand what it is. Blockchain, in its most basic form, is a data structure that allows the creation of a digital ledger of transactions and their sharing across a distributed network of computers.

The primary advantage of blockchain is that it fosters trust among parties who share information. The information exchanged is encrypted in the form of an electronic list of records or blocks. It cannot be erased, which contributes to user trust. Once information is recorded, it cannot be altered without changing all of the records, allowing for secure user transactions. We can see how this would be beneficial to the life insurance industry, as it helps to ensure that information is accurate, secure, and trustworthy.

Blockchain and Munich Re

The Blockchain Insurance Industry Initiative was founded by Munich Re (B3i). B3i is a consortium of 15 insurance companies testing the potential of blockchain technology. B3i's initial focus was on property-casualty insurance, with the goal of determining how insurers can use blockchain for catastrophe excess of loss coverage. Blockchain is being used to automate and streamline claims payment processes. The B3i initiative was so successful that it was spun off into a separate entity called the B3i Consortium.

Blockchain and Bitcoin

Blockchain is the technology that allows cryptocurrencies to exist. Bitcoin is the first cryptocurrency, or electronic cash, for which blockchain technology was developed. Cryptocurrency is a digital currency that employs encryption techniques to control the creation of monetary units and to validate the transfer of funds. Bitcoin was created to function as a form of peer-to-peer payment in the blockchain.

Bitcoin facilitated online currency transactions by removing the need for third-party intermediaries. This avoidance of third-party intermediaries enables currency transactions on a blockchain to take place without the use of a bank, which may charge fees per transaction.