Insurers have recognised the need to adapt to evolving technological advancements and in particular, the advantages of Blockchain in circumventing possible data privacy issues. Distributed Ledger Technology offers not only added security through data encryption, but also a way to monetise data via the use of smart contracts and cryptocurrencies. This has the potential to challenge the dominance of tech giants, for example, Facebook, Amazon and Google, in relation to the use of data as a means of generating revenue.
We are seeing a greater emphasis on ensuring data privacy with the introduction of stricter rules in the EU such as the upcoming new General Data Protection Regulation this year. Blockchain allows individuals increased control over the use of their data and therefore avoids the problems of companies prying into personal data. In addition, Blockchain significantly diminishes the need for intermediaries. As a result, insurers are eyeing up the benefits of the new technology.
However, it is possible that peer-to-peer insurance models could be generated whereby the insurer is replaced by automated “smart contracts”, which set out the parties’ obligations and are stored on the blockchain. An example of a smart contract is “Fizzy”, developed by Axa. Fizzy provides insurance against two hour plus flight delays using data automatically gathered from air traffic control.
Insurers will need to protect against the ever-expanding tech giants, particularly in view of Amazon’s recent entrance into the healthcare market in the US and rumours that Facebook and Google are considering similar entries. However, insurers must balance this on the one hand with the threat of obsolescence posed by developments in technology on the other.