The key adoption challenges for blockchain in insurance include smart contract security, transaction finality, privacy, scalability, and volatility.

Blockchain innovation moved forward at an astounding pace during 2017 but there are still some areas requiring improvement before they can be reliably used for insurance:

Smart contract security: Smart contracts are very powerful tools that allow for business logic to be encoded within the blockchain. Developer tools and best practices are still immature however which has led to some high profile bugs over the past year that would have been devastating to an insurance business (e.g. loss of funds stored in a multi-signature contract).

Transaction finality: When a person or company takes out insurance they need to know for certain that the policy is good and that their risk is covered. The binding process must be final with no chance of it being reverted at a later date. Arguably it is impossible to be certain of this under any circumstances. For public blockchains the probability of transaction finality can be estimated and it depends upon the economics and consensus algorithm being used. This can make it difficult for insurance companies to rely on.

Privacy: Transaction data on public chains is in the clear for all to see. Unless advanced cryptography is utilised it may be possible for attackers to figure out exactly which insurance policies a person has taken out, which could then open the door to fraud. There are several projects working to address this by using techniques such as ring signatures and zero knowledge proofs but they are still experimental and it will be a while before they are ready to be used by financial institutions.

Scalability: Slow block time and full blocks are resulting in a poor user experience that people coming from the web will not be accustomed to. They expect things to be easy and instant. When using a blockchain one can wait up to 30 minutes before being confident that a transaction is complete. Transaction fees vary widely due to network congestion and sometimes it may not be included in a block at all if the wallet has not determined the correct fee.

Volatility: Most people that own cryptocurrency are not willing to spend it on something that is not likely to make them money. We can see this from the results of the blockchain for insurance survey we published last year. Either cryptocurrencies themselves need to become less volatile or a new type of token needs to be created that holds a more constant value. This could be a fiat (GBP, USD, EUR, etc) backed token provided by a bank or something with a more novel approach.

2018 will be a year when solutions for these challenges become available and start to be used by real world applications. In order to provide a reliable product that can deliver real world benefits to our customers and policyholders today we have utilised the Corda distributed ledger. This forgoes some of the benefits of public blockchains in order to provide the levels of privacy, scalability and security required by financial institutions. Blocksure will be working closely with our customers to implement new insurance products that take advantage of the best technology available.

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