Insurance and the Blockchain

Brad Weber, Esq.

What is the blockchain?

Blockchain, or distributed ledger technology as some call it, consists of a distributed digital ledger to track public transactions chronologically. Software marks each data block with a unique hash and a time-stamp and connects that data block to the last block in the chain. No centralized or secret ledger exists as the entire public chain resides on multiple computers all over the world. For a more detailed explanation see read James L. Salmon's article "The Future of Payments in Construction: Pay me on the Blockchain!"

Will the blockchain disrupt insurance? 

Just as big banks formed a consortium - the R3 Consortium - to explore uses of the blockchain in finance, several large insurers and reinsurers recently launched the Blockchain Insurance Industry Initiative (B3i) intended to explore the potential uses of the blockchain as a mechanism to lower costs and improve customer service in insurance. On a related note, American International Group ("AIG") and IBM recently wrote a smart multi-national insurance contract on the blockchain. Earlier this year Bitfury Group, a company already working to put land records in Georgia and the Ukraine on the blockchain, signed a strategic partnership agreement with Risk Cooperative based out of Washington D.C. to explore blockchain use scenarios in the insurance brokerage market.

Dante Disparte, the CEO and Founder of Risk Cooperative had the following to say about the blockchain:

"Blockchain is being heralded as a foundational technology.  Not unlike the early days of the Internet, which was met with what can only be described as anxious ambivalence, Blockchain is undergoing a similar reception in the market.  However, unlike the early days of the Internet, Blockchain relies on existing global connections, so the speed with which it can disrupt markets and industries may be twice as fast.  Insurance may very well be one of the industries with the most to gain from this technology depending on how quickly we act."

As the use of Blockchain technology expands, the insurance industry would be well served to keep an eye on these and other developments.

The Blockchain Insurance Industry Initiative (B3i) launched in 2016 to explore potential uses of blockchain in the insurance industry evidences the seriousness with which industry leaders take the potential impact of blockchain. B3i includes international insurers and reinsurers and involved in the creation of a prototype smart natural catastrophe excess of loss property written on the blockchain for the reinsurance market.

How will insurance on the blockchain impact clients of BYH?

Smart insurance contracts written on the blockchain have the potential to completely revolutionize the insurance market. In that environment our insurance clients will be forced to deploy new business models and our business clients may be required to procure insurance differently. Specifically, trade contractors may be called on, in the not too distant future, to create digital identities on the blockchain. Digital identities on the blockchain provide the owners of such identities with remarkable flexibility regarding the information they chose to share, when they choose to share it and with whom they choose to share it. In the context of bidding work, an entity might reveal certain information to the owner or a surety, but as long as that information resides on the blockchain it can remain protected and an entity need only share it as it sees fit.

Use of such digital identities enables the consummation of transactions in real time sans any third party over-sight. This encourages faster transactions at lower costs, and decreased risk of fraud - along with better service for all stakeholders through the improved flow of information. These changes are likely to improve both the underwriting and claims functions in insurance and the bidding process in construction. The insurance-related initiatives mentioned above illustrate the emerging potential for blockchain in the industry and BYH is spearheading efforts to increase knowledge and use of the blockchain in the built environment.


Regardless of how the blockchain evolves BYH will keep its finger on developments and keep its clients abreast of those developments. If you have any questions please contact Brad Weber at BYH.