“Smart contracts” could significantly change the insurance industry
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Pinsent Masons has teamed up with Applied Blockchain to study the effect of blockchain technology on the insurance industry.
Blockchains are distributed digital ledgers that keep track of all transactions related to digital currencies like bitcoins. The technology, which underpins cryptocurrencies, also enables the use of “smart contracts,” which can potentially be used in a wide array of industries including insurance.
“The concept of a ‘smart contract’ is an intriguing one for lawyers – at one end of the spectrum the discussion is about artificial intelligence replacing all of the aspects of drafting, whilst at the other, it could be used simply as a means of executing payment obligations and actions conditional on payment,” said Tim Roughton, Pinsent Masons partner. “But that said, smart contracts can offer real benefits to the insurance industry including simplification, automation, increased standardisation and electronic execution.”
Pinsent Masons said that a number of features of the insurance sector that align to the features of blockchain. This includes heavy reliance on documentation, data analysis and databases. Both sectors also involve many parties, are heavily intermediated, and are interested in minimising fraud. These overlaps may mean blockchain technology can improve processes in the insurance industry.
“Smart contracts are so powerful because of their flexibility. They can encrypt and store data securely, restrict access to that data to only the desired parties and then be programmed to utilise the data within a self-executing logical workflow of operations between parties. Smart contracts translate business process into computational process, greatly improving operational efficiency,” said Peter Bidewell, Applied Blockchain chief marketing officer.
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Major firm launches full-fledged bitcoin practice
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Blockchains are distributed digital ledgers that keep track of all transactions related to digital currencies like bitcoins. The technology, which underpins cryptocurrencies, also enables the use of “smart contracts,” which can potentially be used in a wide array of industries including insurance.
“The concept of a ‘smart contract’ is an intriguing one for lawyers – at one end of the spectrum the discussion is about artificial intelligence replacing all of the aspects of drafting, whilst at the other, it could be used simply as a means of executing payment obligations and actions conditional on payment,” said Tim Roughton, Pinsent Masons partner. “But that said, smart contracts can offer real benefits to the insurance industry including simplification, automation, increased standardisation and electronic execution.”
Pinsent Masons said that a number of features of the insurance sector that align to the features of blockchain. This includes heavy reliance on documentation, data analysis and databases. Both sectors also involve many parties, are heavily intermediated, and are interested in minimising fraud. These overlaps may mean blockchain technology can improve processes in the insurance industry.
“Smart contracts are so powerful because of their flexibility. They can encrypt and store data securely, restrict access to that data to only the desired parties and then be programmed to utilise the data within a self-executing logical workflow of operations between parties. Smart contracts translate business process into computational process, greatly improving operational efficiency,” said Peter Bidewell, Applied Blockchain chief marketing officer.
Related stories:
Major firm launches full-fledged bitcoin practice
Bitcoin rallies as Japan adapts cryptocurrency as legal tender
