Blockchain is simultaneously one of the most exciting and confusing new
technologies to emerge over the last decade. In its simplest form,
blockchain is a ledger. In its more complex form, it is an incorruptible
decentralized digital ledger existing simultaneously across millions of
networks that is both transparent and veiled all at the same time.
It’s like Santa’s list, except instead of being checked twice it is checked
hundreds of times per second, and everyone has a copy of it to see these
updates. They don’t see names, only a series of numbers representing names
– there is currently no evidence that they see you when you’re sleeping or
know when you’re awake.
The ledger is not limited to just names. While this invention was
originally devised to keep track of exchanges of the digital
crypto-currency known as bitcoin, its potential uses stretch to almost
every corner of business and industry. Insurance, real estate, private
transport and ridesharing, online data storage, crowdfunding, public
benefits, healthcare, real estate, and government affairs are just a few of
the platforms blockchain has the potential to completely disrupt over the
next several years.
This article will examine the potential for blockchain in insurance
regulation and describe, as an example, recent use of blockchain by the
County Auditor in Columbus, Ohio – a first of its kind use of the platform
for real estate transfers.
Blockchain and insurance
Insurance is a data-rich and data-dependent industry. Blockchain has the
capability of “re-democratizing” data, according to former CEO of Aon
Benfield Analytics Stephen Mildenhall.
Mildenhall told A.M. Best that blockchain directly addresses three major
concerns about databases, their integrity, security and validity.
But how does blockchain apply to the mass amounts of data insurers use
Blockchain can help insurers by eliminating duplicity and by increasing
security and confidence in the many financial and legal transactions that
take place in the sale of insurance.
The ledger can also manage and facilitate sharing of large amounts of data
critical to insurance transactions.
With the rise of digital devices and their use in the sale of insurance,
Blockchain can help manage third-party transactions and verify the identity
and validity of the parties to those transactions.
Similarly, blockchain can aggregate data from multiple sources to
facilitate the creation of “smart contracts” personalized for each
Finally, and related to blockchain’s heritage in crypto-currencies, the
ledger can be used to manage and calculate the reserves necessary to
adequately manage reinsurance and exposure to various risks.
Most notably, blockchain increases speed and security by eliminating middle
men and women.
By allowing users to interact directly and utilizing a world-wide, shared
database checked and rechecked by thousands of participants, supporters of
blockchain boast that it is a one-stop-shop for eliminating fraud.
Insurers can utilize the technology to advance “bespoke” insurance and
engender trust that a policy has been purchased and is in force in real
time – whether that coverage is marine, travel insurance, ride-share
coverage, or some other new type of price-per-mile policy.
Major players in insurance have decided to collaborate in their study and
use of blockchain through consortia like B3i, R3 and the RiskBlock
Unlike traditional insurance innovation, the collaborative approach allows
the industry to advance the use of this new technology more rapidly. And,
while blockchain is revolutionary in its application to sharing and moving
information and currency, one of the most impactful results of this
technology is rather old-school – back-office costs savings through
functionalities and operational efficiencies.
A County Auditor in Columbus, Ohio, is using the blockchain ledger to
execute real estate transactions that used to be time-consuming and paper
intensive. Franklin County Auditor Clarence Mingo is the first public
official in the state of Ohio, and likely in the nation, to utilize the
technology in this way.
The Auditor tapped local startup SafeChain to manage the transactions which
will record property transfers “in a fully digital process where the buyer,
seller, bank, appraiser and title company never meet, but still complete
the sale of a home.”
According to Mingo, the process is “nearly hack-proof, but still gives each
party total control of their aspect of that transaction.”
The program utilized SafeChain’s platform to transfer 37 properties sold
through a foreclosure auction.
The Auditor allowed potential buyers to bid online; successful bidders can
then retrieve their deed from blockchain after a bar code is added to the
original paper record.
For their part, lawmakers in Ohio passed a bill on cybersecurity in June of
2018 that added blockchain to the types of technology considered an
electronic record for purposes of business transactions and cybersecurity.
They are not the first state to recognize the need to encourage, and
regulate, the use of blockchain.
As of July of 2018, 10 states have passed bills regarding the use of
blockchain in business and public transactions.
These laws range from creating study groups (CT, IL, WY), to limiting
regulatory power to the state (AZ) to recognizing blockchain as a
legitimate business apparatus and regulating its use/harmonizing its
functionality with existing state laws (AZ, DE, NV, OH, TN, VT, WY).
Furthermore, 13 states have enacted legislation controlling the use of
blockchain for crypto-currency transactions.
Finally, the industry is already seeing use of blockchain for purely
regulatory purposes. The American Association of Insurance Services has
announced the use of blockchain to help insurers share information with
regulators in a secure and rapid fashion.
IBM and Hyperledger Fabric’s openIDL service will “streamline the
regulatory reporting process…improve[ing] security, accessibility and
accuracy of data for regulators.” According to AAIS’s CEO Ed Kelly.
Insurers must be in a position to leverage blockchain in many different
aspects of their business. Consultants EY stated that “the insurance
industry must make investments now to be in apposition to take advantage of
efficiencies and opportunities blockchain technology can deliver long
One of the first applications of blockchain in the insurance space is
through policy and claims management for marine hull insurers. This
application was developed through collaboration between EY, Guardtime, A.P.
Moller-Maersk, Microsoft and Willis Towers Watson, XL Catlin, MS. Amlin,
The breadth and depth of insurance and business experience in this team
shows the seriousness of the industry when it comes to blockchain. It also
demonstrates that marine hull insurance is just the beginning of a new
frontier in insurance innovation and regulation. Many new applications and
questions will follow
The use of distributed ledgers in the insurance industry will only continue
to grow. As the world becomes more complex and insurance tries to keep
pace, blockchain will be a critical part of the business and essential to
the continued success of the industry.