Blockchain and Smart Contracts for Insurance: Is the Technology Mature Enough?

Abstract

Blockchain is receiving increasing attention from academy and industry, since it is considered a breakthrough technology that could bring huge benefits to many different sectors. In 2017, Gartner positioned blockchain close to the peak of inflated expectations, acknowledging the enthusiasm for this technology that is now largely discussed by media. In this scenario, the risk to adopt it in the wake of enthusiasm, without objectively judging its actual added value is rather high. Insurance is one the sectors that, among others, started to carefully investigate the possibilities of blockchain. For this specific sector, however, the hype cycle shows that the technology is still in the innovation trigger phase, meaning that the spectrum of possible applications has not been fully explored yet. Insurers, as with many other companies not necessarily active only in the financial sector, are currently requested to make a hard decision, that is, whether to adopt blockchain or not, and they will only know if they were right in 3–5 years. The objective of this paper is to support actors involved in this decision process by illustrating what a blockchain is, analyzing its advantages and disadvantages, as well as discussing several use cases taken from the insurance sector, which could easily be extended to other domains.

Full text


FutureInternet2018,10,20;doi:10.3390/fi10020020

www.mdpi.com/journal/futureinternet
Article
BlockchainandSmartContractsforInsurance:Isthe
TechnologyMatureEnough?
ValentinaGatteschi
1,
*,FabrizioLamberti
1
,ClaudioDemartini
1
,ChiaraPranteda
2
and
VíctorSantamaría
3

1
PolitecnicodiTorino,DipartimentodiAutomaticaeInformatica,CorsoDucadegliAbruzzi24,10129
Torino,Italy;fabrizio.lamberti@polito.it(F.L.),claudio.demartini@polito.it(C.D.)
2
RealeGroupInnovationTeam,ViaCorted’Appello11,10129Torino,Italy;chiara.pranteda@realemutua.it
3
RealeGroupInnovationTeam,PríncipedeVergara,125,28002Madrid,Spain;
victor.santamaria@realeites.com
*Correspondence:valentina.gatteschi@polito.it
Received:30December2017;Accepted:14February2018;Published:20February2018
Abstract:Blockchainisreceivingincreasingattentionfromacademyandindustry,sinceitis
consideredabreakthroughtechnologythatcouldbringhugebenefitstomanydifferentsectors.In
2017,Gartnerpositionedblockchainclosetothepeakofinflatedexpectations,acknowledgingthe
enthusiasmforthistechnologythatisnowlargelydiscussedbymedia.Inthisscenario,theriskto
adoptitinthewakeofenthusiasm,withoutobjectivelyjudgingitsactualaddedvalueisratherhigh.
Insuranceisonethesectorsthat,amongothers,startedtocarefullyinvestigatethepossibilitiesof
blockchain.Forthisspecificsector,however,thehypecycleshowsthatthetechnologyisstillinthe
innovationtriggerphase,meaningthatthespectrumofpossibleapplicationshasnotbeenfully
exploredyet.Insurers,aswithmanyothercompaniesnotnecessarilyactiveonlyinthefinancial
sector,arecurrentlyrequestedtomakeaharddecision,thatis,whethertoadoptblockchainornot,
andtheywillonlyknowiftheywererightin3–5years.Theobjectiveofthispaperistosupport
actorsinvolvedinthisdecisionprocessbyillustratingwhatablockchainis,analyzingitsadvantages
anddisadvantages,aswellasdiscussingseveralusecasestakenfromtheinsurancesector,which
couldeasilybeextendedtootherdomains.
Keywords:blockchain;bitcoin;insurance;smartcontracts

1.Introduction
Ablockchainisadistributedledgermaintainedbynetworknodes,recordingtransactions
executedbetweennodes(i.e.,messagessentfromonenodetoanother).Informationinsertedinthe
blockchainispublic,andcannotbemodifiedorerased[1].Smartcontractsareself‐executing
contracts(generallysavedonablockchain)whosetermsaredirectlywrittenintolinesofcode[2].
Recently,blockchainanditsrelationswithsmartcontractshasreceivedincreasingattention
frommedia,whichstartedtoaddressitas“Thenextbigthing”[3],“Thenewblack”,“The
philosopher’sstone”[4]or“ThenewGraal”[5].In[6],blockchainhasbeencomparedtoinventions
suchasthesteamorcombustionengine,sinceitispotentiallyabletobringbenefitstoavarietyof
everydayactivitiesandbusinessprocesses.
AccordingtoGartner’shypecycle,blockchainisatthepeakofinflatedexpectations,wherethe
enthusiasmisatthehighestlevelpossible[7].Nonetheless,concernsstartedtobeexpressedaswell
aboutamassiveadoptionofblockchain[5,8–13].Thecommondenominatorintheaboveconcernsis
thattechnologyisconsidered,ontheonehand,tobenotfullymatureyet[5,9]and,ontheotherhand,

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tobeoverhyped[8],sinceitsapplicationoftenproducesoutcomesthatcouldbeachievedusingwell‐
masteredalternatives[10].
Theriskisthatoneissomuchinlovewiththistechnologythatitbecomesimpossibleforoneto
objectivelyjudgeitstruebenefits.AsstressedbyAdamCooper,atechnicalarchitectoftheBankof
England,“[Withblockchain]thefocusasalwaysshouldbeonfulfillinguserneeds,noton
implementingtechnologiessimplybecausetheyarecleverorinteresting.”[11].
Theinsurancesector,aswithmanyothers,startedtoinvestigatetheapplicationofblockchain
technologythroughconsiderableinvestmentsfrombothbigandsmallcompanies[14,15],
investigationsfromconsultancyfirms[4,16,17],andthecreation,in2016,oftheB3i,thefirst
blockchain‐centeredinsuranceconsortium[18].
Thehypecyclefortheinsurancesector[19],however,depictsblockchaintechnologyatthe
beginningofthecurveconnectingthetechnologytriggerphasewiththepeakofinflatedexpectation,
meaningthatthistechnologyhasnotbeenfullyexploredyetinthisparticularsector.Hence,the
questionsthatinsurancecompaniesareaskingthemselvesrightnoware“Arethereclearusecases
exploitingblockchaintechnologyandsmartcontractsintheinsurancesector?”,“Incasewewantto
adoptablockchain,whatisthemostsuitableblockchainarchitectureforourneeds?”and,morein
general,“Isblockchaintechnologymatureenoughforinsurance?”.Ithasbeenestimatedthatthey
willneedtowaitabout3to5yearstoseewhethertheymadetherightchoicetodaybydecidingto
investornotinblockchainfortheirbusiness[20].
Theobjectiveofthispaperistohelpcompaniesoperatingintheinsurancesectortoanswerthe
abovequestionsbyprovidinganoverviewofblockchain‐(andsmartcontracts‐)basedusecasesin
suchspecificsector,andbyhighlightingstrengths,weaknesses,opportunitiesandthreatsforthis
technology.Theauthorsdecidedtofocusoninsurancebecause,inthissector,blockchaintechnology
couldhavearelevantimpactonavarietyofprocessesandapplicationscenarios.Notwithstanding,
itisworthobservingthat,despitethefocusontheparticulardomaintheauthorsareoperatinginto,
manyoftheexamplesprovidedandconsiderationsmadethroughoutthepapercouldbehelpfulfor
anumberofothercompanies,notnecessarilyfromthefinancialdomain.Infact,theaimisto
stimulatereflectionsanddiscussionsonthistopic,leavingtothereaderthefinaljudgmentonthe
actualbenefitsthatcouldcomefromtheadoptionoftheconsideredtechnologyinaspecificscenario.
Thepaperisorganizedasfollows:Section2providesanoverviewoftheblockchaintechnology,
bypresentingitskeyconcepts.Section3discussesseveralusecasesfromtheinsurancesector,by
mentioningprototypesolutionsavailablesofar.DiscussioniscomplementedbySection4,which
reportsaSWOTanalysisperformedonawidercontexttobroadenthescopeoftheanalysisbeyond
theinsurancedomain.Finally,conclusionsaredrawninSection5.
2.HowBlockchainWorks
Theblockchain(literally,a“chainofblocks”)madeitsfirstappearanceintheresearchscenario
in2008,intheframeoftheBitcoininitiative[21,22].Theobjectivewastotransferonlinepayments
fromonepartytoanother,withoutrelyingonintermediaries.Inthiscontext,theblockchainwas
actingastheunderlyingledgerrecordingBitcointransfersandguaranteeing,bymeansof
cryptographicoperations,theauthenticationandnon‐repudiationofpayments.
EventhoughBitcoinis,byfar,themostfamouscryptocurrency,itisnotalone.Infact,since2008,
morethan1300cryptocurrencieshavebeencreated[23],whicharebeingusedasexchangetokensin
manydifferentblockchain‐basedapplications.
Thecoreconceptsbehindtheblockchaintechnologyarereportedinthefollowing.
‐ Transactions:eachcryptocurrencytransferfromonesubjecttoanotherisrepresentedasa
transactionfromAtoB.Cryptocurrencyisneitheraphysicalnorasoftwareobject,buttheresult
ofincomingandoutgoingtransactions.Forthisreason,theblockchainkeepstrackofallthe
transactionsoccurredfromitsbirth.
‐ Blocks:transactionsaregroupedinblocks.Eachblockcollectsallthetransactionsoccurringina
giventimeframeandkeepsareferencetotheprecedingblock(thatiswheretheconceptof
“chain”comesfrom).

FutureInternet2018,10,203of16
‐ Nodes:insteadofbeingstoredinacentralizeddatabase,theblockchainisspreadovernetwork
computers(the“nodes”),eachcontainingalocalcopyoftheentireblockchain.
‐ Majorityconsensus:sinceacentralauthorityismissing,decisionsonthenetworkaremade
accordingtoamajorityconsensus.Eachnodemodifiesitslocalcopyoftheblockchaintomake
itmirrorthestatusofthemajorityofthenetworknodes.
‐ Mining:nodescouldeitherpassivelystoreacopyoftheblockchain,oractivelytakeparttothe
maintenanceoftheblockchain,intheso‐called“mining”process.Duringmining,nodescheck
previoustransactionstoverifywhetherasubjectisentitledtospendagivenamountof
cryptocurrencyand,eachtimeablockhastobeaddedtothechain,solveacomplex
computational‐intensivemathematicalproblem.Thisproblemwasspecificallydesignedtolimit
thepossibilityforamaliciousentitytomanipulatetheblockchainbyfalsifyingtransactions.The
probabilityofattacksisextremelylow,sinceaddinganew(malicious)blockormodifya
previouslyaddedblocktothechainwouldrequirecontrolofthemajorityofthenetworknodes
(tomakethemagreewiththemodification).
‐ Wallet:peopletransfercryptocurrencyusingwallets.Cryptocurrencycannotbestoredona
physicalmemory;rather,itistheresultofprevioustransactions.Hence,thewalletonlystores
credentials(acomplex,unchangeablecombinationofautomaticallyassignednumbersand
letters),whichenableblockchainuserstotransfercryptocurrenciestheyown.Eachwalletis
associatedtoone(ormore)uniqueaddresses.Shouldauserwanttosendagivenamountof
cryptocurrencytoapeer,he/shewouldhavetospecifytherecipient’saddressandthedesired
amount,andusehis/hercredentialstovalidatethetransaction.Thisaspectisparticularly
important,sinceincaseofcredentialsloss,thecryptocurrencyownedbytheuserwouldnot
“disappear”,buttheuserwouldbenomoreabletospendit.Moreover,thefactthattheuser
validatesthetransactionwithhis/hercredentialscertifiesthathe/shewastheactualinitiatorof
thetransaction.
Inordertobetterunderstandhowtheblockchainworks,itcouldbeworthconsideringthe
exampleshowninFigure1.Inthedepictedscenario,Alicewantstosendsomeamountof
cryptocurrencyfromherwallet(withaddress“x1z”)toArthur’swallet(withaddress“v4y”).

Figure1.Performingtransactionsontheblockchain.
Alicemakesastatementinwhichshespecifiestheamounttobetransferredaswellasthe
recipientofthetransfer,andvalidatesthismessagewithhercredentials(forsakeofreadiness,the
‐
Rose
sent
200
to
Alice
‐
Alice
sent
100
to
Bob
‐
Bob
sent
5
to
Charlie
‐
Jeff
sent
43
to
Bill
‐
Julia
sent
40
to
Alice
‐
…
‐
…
Alice
Alice
broadcasts
the
message
to
the
network
Send
to
Arthur
Arthur
Each
block
contains
recordings
of
several
previous
transactions
The
blockchain
is
stored
on
network
nodes
Nodes
check
if
the
message
was
actually
sent
by
Alice
and
if
she
owns
the
money
she
wants
to
transfer
(by
comparing
incoming
and
outcoming
transactions).
If
so,
they
add
the
transaction
to
a
block
(which
also
contains
other
transactions
occurred
in
the
same
time
frame)
#1
#2
#3
#4
The
blockchain
is
a
collection
of
ordered
blocks
The
added
block
contains
the
transaction
from
Alice
to
Arthur
In
order
to
add
the
new
block
to
the
blockchain,
the
nodes
have
to
solve
a
complex
mathematical
problem
(mining)
The
problem
is
finding
a
random
number
that,
if
combined
with
a
numeric
summary
of
the
previous
block,
provides
a
given
result
+
1531
=
+
6486
=
+
385
=
…
…
…
When
the
problem
is
solved,
the
new
block
is
added
to
the
blockchain
‐
Alice
sent
2
to
Arthur
‐
Bill
sent
30
to
Jeff
‐
…
‐
…
Arthur
receives
the
money
x1y
v4y

FutureInternet2018,10,204of16
imagereportsusers’namesinsteadoftheiraddresses).Then,shebroadcaststhemessagetothe
network.Networknodesverifyifthemessage’ssenderwasactuallyAlice(byverifyingifthe
messagewascorrectlyvalidatedusinghercredentials),andcheckifshepossessestheamounttobe
transferred.Inordertoperformthischeck,theyusetheirlocalcopyoftheblockchainandanalyze
incomingandoutgoingtransactionsfromAlice’swalletaddressthatarestoredinpreviousblocks.If
themessagesentbyAliceisvalidandsheisentitledtospendthemoney,theyaddAlice’stransaction,
togetherwithothertransactionsoccurringinthesametimeframe,toablock.Inordertoaddthe
blocktotheblockchain,theythenstartsolvingacomplexmathematicalproblem,wheretheyhaveto
findarandomnumberthat,combinedwithanumericsummaryofthepreviousblock,providesa
givenresult.Duringthis(mining)process,thefastestnodereceivesamonetaryreward.Whenavalid
resultisfound,thenewblockisaddedtotheblockchain.Asaresult,Arthurreceivesthemoney.
Theaboveexampleshouldhaveallowedthereadertogetbetteracquaintedwiththemain
characteristicsoftheblockchain,whichmakeitadisruptivetechnology:
‐ Decentralizedvalidation:thevalidationoftransactionsisperformedbynetworknodeswithout
theneedofintermediaries;
‐ Dataredundancy:eachnetworknodehasalocalcopyoftheblockchain,whichpreventsdata
losses;
‐ Dataimmutability:datastoredintheblockchaincouldnotbemodifiedordeleted;
‐ Trust:cryptographyenablestrustbetweenparties,sinceatransactionthathasbeenvalidated
usinguser’scredentialscannotberepudiated;
‐ Transparency:everyonecouldreadtheblockchainandthetransactionsstoredinit.
ThoughtheexampleinFigure1referstoatransferofcryptocurrency,applicationpossibilities
oftheblockchainarenotlimitedtomonetaryassets,butcouldencompassawidevarietyofusecases.
Amongtheearlyapplicationscenariosthatwereexploredfortheblockchain,itisworthrecalling
thenotarialcontext.Infact,sincetheblockchainisimmutableandpubliclyavailable,researchers
suggestedusingitforstoringpublicrecordsandattestations[1].Anotherdomainwherethe
blockchainhasbeenrecognizedtobeabletobringsignificantbenefitsisintellectualproperty
protection.Inthiscontext,blockchaintechnologycouldbeusedtoprove/certifytheexistenceofa
documentatagiventime[24].Incontextswhere,e.g.,freedomofthoughtisthreatened,blockchain
technologycouldbeusedtostoreinformationinordertoavoidcensorship[25]:infact,everyonecan
writeinformationontheblockchainandreadit.
Astimehaspassed,researchershaverealizedthattheblockchaincouldalsobeusedtostore
otherkindsofassets,includingpiecesofcode.Itwasthebirthof“smartcontracts”,i.e.,small
programsstoredintheblockchainandprogrammedtoautonomouslybehaveinagivenmanner
whensomeconditionsaremet.
Theideaofasmartcontracthasbeenknownsincethe90s[26],butitwasonlywiththe
blockchaintechnology—and,inparticular,withtheEthereumblockchain(probablythemostfamous
blockchainafterBitcoin)—thatsmartcontractswereabletounleashtheirfullpotential[27].
Withasmartcontract,apersoncould,forinstance,encodehis/herwillintheblockchaininthe
formofasetofrules.Incaseofdeath,thesmartcontractcouldthenautomaticallytransferthe
testator’smoneyorotherkindofassetstothebeneficiary.Thetestatormayalsoprovideadditional
constraints,suchasenablingthetransferonlywhenthebeneficiaryreachestheageofmajority,when
he/sheobtainsadiploma,etc.
Sincesmartcontracts’conditionsarebasedondatastoredintheblockchain,theyneedtorely
onexternalservices,whichtakedatafromthe“real”world(e.g.,fromdeathrecords)andpushthem
totheblockchain(orviceversa).Theseservicesarereferredtoas“oracles”[28].Byconsideringthe
testator’sexample,anoraclecouldinspectdeathrecordstoidentifywhetherthepersonpassedaway.
Ifso,itcouldwritethisinformationontheblockchain(e.g.,bychangingthevalueofaBoolean
variableindicatingwhetherthepersonisaliveornot).Thesmartcontract,then,wouldtriggera
conditionalstatement(basedonthevalueofthevariable),andexecutetheblockofcodeinitiating
themoneytransfer.

FutureInternet2018,10,205of16
Basedonthetypeofinformationcollectedandontheinteractionwiththeexternalworld,oracles
havebeengroupedinto“software”/“hardware”oracles,and“inbound”/“outbound”oracles[29].
SoftwareoraclesareinchargeofextractinginformationmainlyfromWebsources,whereashardware
oraclesaremeanttoextractinformationfromthephysicalworld(e.g.,throughsensors).Inbound
oraclesinsertinformationintheblockchain,whereasoutboundoraclesallowsmartcontractstosend
informationtotheexternalworld(e.g.,lettinghotels’intelligentlockersunlockthemselvesassoon
asapersonpaysforanight).
Oracleshaveahugeresponsibilityinthecorrectexecutionofsmartcontracts,astheinsertionof
wronginformationcouldtriggeramoneytransferwithoutpossibilityofrefund.Thus,thereare
companiesthathavedevelopedoraclesthatcertifytheauthenticityofextracteddataforasmallcost
[28].Insomecases,itcouldbeworthrelyingonmorethanoneoracle,e.g.,byconsideringasituation
as“happened”if3outof5oraclesconfirmit[30].
Recently,anevenmorecomplexapplicationofsmartcontractsandoracleswasproposed,which
isassociatedtotheconceptofDecentralizedAutonomousOrganization,orDAOs[31].Inthiscontext,
smartcontractsareusedtoencoderulestogovernanorganization,e.g.,howdecisionsaretaken,the
weightofeachmember’svote,etc.Theadvantageisthatnoexternalpartyisrequiredtoverifythat
theorganizationisproperlymanaged,andunderlyingrulescanbeverifiedbythewiderpublic,
ensuringtransparencyandtrust.
Fromthearchitecturalpointofview,itisworthremarkingthatthereexistdifferenttypesof
blockchains,whichdifferintermsofread/writepermissions.“Publicblockchains”(suchasthe
Bitcoinblockchain)areblockchainsthatcouldbereadableandpotentiallywritablebyeveryone.
“Privateblockchains”areblockchainsthatcouldbewrittenonlybyorganizationmembers.Read
permissionscanbeeitherrestrictedtotheorganization,ormadepublic.In“consortiumblockchains”,
asetofselectednodesbelongingtodifferentinstitutionscontrolvalidation,andtheblockchainis
usedtoshareinformationamongparticipantinstitutions.Publicblockchainsareparticularlyuseful
whennocentralentityisavailabletoverifyatransaction,andfulldecentralizationisneeded.Private
andconsortiumblockchainsprovidesomeadvantages,suchaslowervalidationcostsandshorter
validationtimes(giventhefactthat,becauseofthesmallernumberofnodes,themathematical
problemcanbesimplified),reducedriskofattacks(sincenodesthatvalidatetransactionsareknown)
andincreasedprivacy(asreadpermissionscouldbegrantedonlytoselectednodes).Furthermore,
incaseoferrorsorbugsinsmartcontracts,privateandconsortiumblockchainscouldextraordinarily
modifyorrevertprevioustransactions.
Thechoiceofthetypeofblockchaintoadoptshouldbebasedontheamountofdecentralization
required,andontime/costconstraints[8,32].Eventually,somehybridsolutions,exploitingcross‐
chainexchangelayersbetweenpublicandprivateblockchains,couldbeexploited[33],e.g.,byusing
aprivateblockchainforacompany’sbackendactivitiesandapublicblockchainforreceiving/sending
moneyfrom/tocustomers.Finally,itmustbeunderlinedthat,whenselectingtheblockchaintouse,
oneshouldpayattentiontoavoidingdecentralizationforthesakeofitself.Infact,anumberof
companies’processesarecurrentlymanagedinasuccessfulwayusingrelationaldatabases,andthe
switchtoa(private)blockchaincouldnotbeworththeeffort[8,32].Withrespecttoprivate
blockchainsversuscentralizeddatabases,expertsarguethat“thebiggestadvantagesofprivate
blockchainsincomparisontocentralizeddatabasesarecryptographicauditingandknownidentities.
Nobodycantamperwiththedata,andmistakescanbetracedback”[34].Otherssuggestthata
blockchaincouldbeasolutionmoresuitablethanadatabaseonlyincaseacompany“planstostart
privatelyandevolveintoaregularpublicblockchainforpubliccross‐verificationasdemand/volume
grows”[34].
3.BlockchainApplicationsinInsurance:SelectedUseCases
Asillustratedintheprevioussection,advantagesofblockchainarevarious.Anumberof
enthusiastsalreadyproposedusingthistechnologyinvarioussectorsandcontexts,including:
‐ Government[35],torecordinatransparentwaycitizens’votes,orpoliticians’programs(for
verifyingifpromisesmadehavebeenkept)ortoenableautonomousgovernancesystems[36];

FutureInternet2018,10,206of16
‐ Intellectualproperty[24],tocertifytheproofofexistenceandauthorshipofadocument;
‐ Internet[25],toreducecensorships,byexploitingtheimmutabilityofdatastoredinthe
blockchain;
‐ Finance[37],totransfermoneybetweenpartieswithouthavingtorelyonbanks;
‐ Commerce[38],torecordgoods’characteristicsaswellastheirownership,especiallyforluxury
goods,thusreducingthemarketofcounterfeit/stolenitems;
‐ InternetofThings(IoT)[39–41],e.g.,byexploitingsmartcontractstoautomaticallyprocessdata
comingfromsensors,inordertoletintelligentmachinesinteractwitheachother[42]and
autonomouslytakeactionswhenspecificsituationsoccur;
‐ Education[43],tostoreinformationonqualificationsacquiredbylearners,e.g.,toreducejob
applicationfrauds;inthiscontext,multipleactors(e.g.,universities,traininginstitutions,etc.)
couldwritequalificationsachievedbyapersonontheblockchain;humanresourcesstaffcould
theneasilyobtaininformationaboutwhenandwhereagivencompetencywasobtained.
Arathercomprehensiveoverviewofapplicationsdevelopedineachoftheabovesectorscanbe
foundin[32,44].Whatshouldbeevidentfromtheabovelististhatbenefitsderivingfromthe
adoptionofblockchaintechnologyarenotlimitedtoasinglesector/scenario.Moreover,evenwithin
agivensector,blockchaincanhavedifferentimpactsconsideringthevariousstakeholdersoperating
init,theirbusinessmodels,theirneeds,etc.
Inthefollowing,theattentionwillbespecificallydevotedtotheinsurancesector,wheretheuse
ofblockchaincouldpositivelyaffectdifferentinternalprocesses(fromcustomeracquisitionand
management,tofraudsprevention,etc.)andcouldevenallowcompaniestoreachnewmarkets
[4,16,17,32].Inparticular,aselectionofusecasesthatcouldpotentiallybenefitfromblockchain
technologywillbeintroduced.Forsomeusecases,prototypeimplementationshavealreadybeen
developed.Inothercases,theuseofblockchainhasbeenonlyanalyzedfromatheoreticalpointof
view.Foreachusecase,advantages,disadvantagesandimpactontheinsurancedomainwillbe
discussed.
3.1.ImprovementofCustomerExperienceandReductionofOperatingCosts
Inthisusecase,blockchainandsmartcontractscouldbeexploitedtoincreasethespeedofclaim
processingaswellastoreducethecosts(andmistakes)associatedwiththemanualprocessingof
claims.Fromthisperspective,asmartcontractcouldencodetherulesforenablingthetransferof
refundfromthecompanytotheinsured.
Asimpleapplicationcouldconsistoftriggeringanautomatictransferofrefundonlyifthe
customerrepairsthecaratacertifiedmechanic,withthemechanicsendingatransactiontothesmart
contracttoproveitsidentity.
Morecomplexusecasescouldalsoinvolveoraclestogatherinformationfromtherealworld.To
makeanexample,incropinsuranceanoraclecouldperiodicallycheckweatherdataandpushthis
informationintheblockchain.Asmartcontractcouldthenreadthesedata,andtriggerapaymentin
caseofpersistenceofbadweather.
Theseproblemshavebeendealtwith,forinstance,intheprototypepresentedin[45].Inthis
case,thefocusisontravelinsurances,andtheideaistoexploitasmartcontractdevelopedonthe
Ethereumblockchainforautomaticallyrefundingtravelersiftheirflight/trainwasdelayed.
Anotherinterestingusecase,whichcouldwidelybenefitfromtheincreasingdiffusionof
sensors,istheexploitationofsmartcontractsincombinationwithIoT.Forinstance,homescouldbe
equippedwithsensorsthatcandirectlynotifyasmartcontractofadamage(e.g.,dampsensorscould
beusedtomonitordamagesontheroof)[46].Similarly,smartappliancescouldautomatically
monitortheirstate,andinitiateaclaimordirectlycontacttherepairerforaquickerassistancewhen
needed.
Solutionssuchastheonesenvisionedabovebringbenefitstodifferentactors:totheinsurance
company,whichcouldreducetheamountofresourcesnormallydevotedtoclaimprocessing,but
alsotocustomers,whowouldreceivemoneyevenbeforehavingbecomeawareofthedamage.

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Anotheradvantagewouldcomefromthefactthateveryonecouldinspectthesmartcontract.
Thatis,thecustomerundersigningapolicywouldgetaclearideaofitscontractualconditions(even
though,atthemoment,he/sheshouldmastersomeprogrammingskillsinordertounderstandthe
smartcontractcode).Consequently,itwouldbecomeeasierforhim/hertocomparepolicies.
Furthermore,thechoiceofapolicywouldnomorebasedonlyonhowmuchhe/shetrustsagiven
company(sincetrustwouldbeimplicitlyguaranteedbythesmartcontract),butonobjectivedata.
Despitetheseadvantages,itmustbesaidthatthescenarioabovecouldbeadoptedonlyfora
limitednumberofpolicies.Infact,themajorityofclaimsprocessedbyinsurancecompaniesstillneed
tobeevaluatedbyanexternalexpertbeforebeingsettled.Incaseofmanualprocessing,however,the
customerexperiencecouldstillbeimprovedbymanagingpaymentsincryptocurrencies,whose
transferwouldbequickerthanwithtraditionalmethods(severalsecondsorminutesdependingon
theblockchainused).
Fromthearchitecturalpointofview,probablythemostsuitablechoiceistoadoptacombination
ofprivateandpublicblockchains.Theprivateblockchaincouldbeusedtorecordpoliciesandclaims
data,whereasthepublicblockchaincouldbeusedtotriggertherefundintermsoftradable
cryptocurrencies(suchasEthersorBitcoins).Theprivateblockchaincouldbemaintainedbytrusted
company’scomputers/nodescharacterizedbylowerminingcostswithregardtothoseofpublic
blockchains.Thepublicblockchainwouldbemaintainedbythewiderpublic,throughthemining
incentivespresentedinSection2.Alternatively,thecompanycoulddecidetoexploitonlyapublic
blockchain.Thischoicecouldbesuccessfulincasethecompanyneedstoimproveitsownreputation
andobtaincustomers’trust(astheprocesswouldbefullydecentralized),butwouldimplyhigher
transactioncosts.
3.2.DataEntry/IdentityVerification
Thecryptographicmechanismunderlyingtheblockchaincouldbeusedtoreducetheoverhead
relatedtomanualdataentryandverificationofnewcustomers[47].
Withtheblockchain,customerswouldbeidentifiedbyauniqueaddress(e.g.,theonelinkedto
theirwallet).Thefirsttimetheyuseaservice,acertifiedintermediarywouldverifytheiridentityand
linkittotheiraddress.Fromthattimeon,everytimetheyundersignapolicy,theywouldnomore
needtoprovideanidentificationdocument;rather,theywouldonlyneedtousetheircredentials.
Benefitsofthisusecasecouldbeseenagaininareducedtimeandcosttogather/provide
information.
Nonetheless,thisusecasealsohassomerelevantdrawbacksthecompanyshouldbeawareof.
Afirstdrawbackisrelatedtothepossibleloss/stealofcredentials.Assaid,sincetheblockchainworks
withoutintermediaries,noonecouldresetusers’credentials.Asolutioncouldbetorelyonexternal
services,whichcouldstorecredentialsandreturnthemtotheusersincaseofloss.However,using
suchserviceswouldmeanprovidingsomeoneelseaccesstoone’ssensitiveinformation.Another
drawbackislinkedtothefactthatthecurrentlegalregulationsshouldbemodifiedtoinclude
blockchain‐basedidentification,andsomegovernmentscouldrefusetoapprovethistypeof
identification,e.g.,duetomistrustinthetechnology.
Fromthearchitecturalpointofview,companiesdecidingtoexploitblockchain‐basedKnow
YourCustomer(KYC)couldrelyonexternalservicesrunningonpublicblockchains.Infact,some
KYCservicesrecentlyappeared,offeringsomeprototypesbasedonexistingblockchains.One
exampleisCivic[48](basedontheBitcoinblockchain)andKYCLegal[49](exploitingtheEthereum
blockchain).Suchcompaniesalreadybuiltanetworkofvalidators,whichreceivearewardforeach
performedvalidationandchargesmallfeestocompaniesrequiringtheirservices.
3.3.PremiumComputation/RiskAssessment/FraudsPrevention
Inthisscenario,theblockchainisusedtoletmultiplecertifiedintermediariesrecordinformation
relatedtoaperson(bylinkingthemtohis/heraddress).
Suchintermediariescouldbeinsurancecompanies(e.g.,torecordpreviousclaims),police
officers(e.g.,tostorecriminalacts),medicalstaffs(e.g.,torecordaperson’sinjuriesandtreatments),

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orevensmartwearabledevices(whichcouldinjectintheblockchaindataaboutone’sphysical
activity).
Asmartcontractcouldreadalltheinformationlinkedtoapersonandautomaticallycompute
thepremiumandperformriskassessment,basedonhis/herphysicalhealth,drivingbehaviors,etc.
[50].
Anotherapplicationscenarioisrepresentedbyfraudprevention.Inthisscenario,asmart
contractcouldanalyzecollecteddataandidentifyfraudsduringclaimprocessing(e.g.,bycrossing
datarelatedtoaperson’spreviousclaims).
Ascenariosuchastheonedepictedintheaboveexamples,however,couldbedifficultlyrealized
intheshortterm.Infact,itimpliesthateachpersonpossessesauniqueblockchainaddress(as
presentedinSection3.2),andrequirestheactiveinvolvementofdifferentactors(insurance
companies,policeofficers,medicalstaff,etc.)asthequalityoftheresultswouldbeaconsequenceof
thequalityandquantityofdatastoredintheblockchain.Privacyisanotherrelevantissue(especially
forwhatitconcernsmedicalrecords).Inthisview,intheconstructionofsuchasystem,athorough
attentionshouldbedevotedtoletonlyselectedactorslinkinformationextractedfromtheblockchain
toaperson’sidentity.Furthermore,particularcareshouldbedevotedtothedefinitionofcommon
standardstorecordtheinformation,inordertoenableinteroperability.
Themostsuitablearchitectureforthisusecaseisaconsortiumblockchain.Theblockchain
wouldbemaintainedbyselectednodesoftheconsortium,e.g.,belongingtothedifferentactors
involved.Thelimitednumberoftrustednodeswouldincreasesecurityandprivacy.Furthermore,
theblockchainwouldkeeptrackofthesenderofeachtransaction.Finally,beingcontrolledbyasmall
numberofnodes,mechanismstorevertblockchainstateincaseoftransactionserroneouslymade
(e.g.,adrivinginfractionnotifiedtothewrongperson)couldbedevised.
3.4.Pay‐Per‐Use/Micro‐Insurance
Smartcontracts‐ andblockchain‐basedpaymentscouldenablenewrevenuesources,suchas
micro‐ andpay‐per‐useinsurances.Thoughinthepastmicro‐insuranceswerethreatenedby
administrativecosts,theexploitationofsmartcontractscouldenablequickandcheappolicy
undersignmentandmanagement(evenonmobiledevices)[51].Similarly,pay‐per‐useinsurances
couldbecomeapraxis,possiblyincombinationwithIoTsolutionsforautomaticundersignment.For
instance,GPSdatacouldbeusedtoautomaticallycollect,e.g.,atravelpremiumonlyifthecustomer
isabroad,acarpremiumonlywhenthecarismoving,etc.Pay‐per‐usemechanismscouldbe
exploitedinservicessuchasUberorAirbnb,e.g.,activatingtheservicewhenacustomerispicked
uporhosted.
Withrespecttotheotherusecasesdescribedinthepaper,fromthepointofviewofactorsand
technologytobeinvolved,thisisprobablyoneofthequickestandeasiesttoberealized(becauseof
thelimitednumberofinvolvedactors,andbecausethefeasibilityofprototypalsolutionshasalready
beendemonstrated[51]).Moreover,fromthepointofviewoftheinsurancecompany,introducing
blockchain‐basedpay‐per‐useinsurances(whichcouldbeevenpaidbyusingcryptocurrencies)
couldbringacompetitiveadvantage,especiallyattractingyoung,technologyenthusiasts.
Concerningarchitecturalchoices,companiesaimingataddressingpay‐per‐useinsurancecould
relyonapublicblockchain.Inthisway,asmartcontractcouldcollectmoneyfromcustomers(e.g.,
EthersorBitcoins),keepthemuntilagivendateandtransferthemtotheinsurancecompanyifno
damageoccurs.Beingonapublicblockchain,everyonecouldinspectthesmartcontractcode,
increasingtrustbetweenparties.
3.5.Peer‐to‐PeerInsurance
Severalpeer‐to‐peerinsurancesalreadyexist[52–54],thoughitmustbesaidthat,atpresent,
theyarenot“real”peer‐to‐peermodels,astheyhaveatraditionalinsurancemodelorriskcarrier
behindthem,supportingtheheavypartoftheinsurancebusiness.
Inthiscontext,smartcontractscouldrepresentanimportantinnovation,astheywouldenable
thecreationofDAOs,whereself‐insuredgroups’functioningrulescouldbehard‐coded.

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AprototypesolutionnamedDYNAMISandbasedontheEthereumblockchainhasalreadybeen
implemented[55].Thissolutionaimstoprovidesupplementalunemploymentinsurancefora
communityofself‐managedpeopleintermsofunderwritingandclaimsacceptanceandprocessing.
Eventhoughinpeer‐to‐peerinsurancetheblockchaincouldreallybecomethekeytechnology,
fromtheinsurancecompany’sperspectiveitmustbeunderlinedthattheobjectiveofpeer‐to‐peer
insuranceistheremovalofintermediaries(i.e.,theinsurancecompaniesthemselves).Hence,awise
choiceinsurancecompaniescouldmakehereistorecognizethisrisk,andturnitfromathreatintoa
businessopportunity,e.g.,byprovidingtheinfrastructureforpeer‐to‐peerinsurance.
Fromthearchitecturalpointofview,sincethisscenariorequiresahighamountof
decentralization,apublicblockchainwouldbemoresuited.
Itshouldbeunderlined,however,thattheadoptionofpeer‐to‐peerinsurancemodelsbythe
widerpublicisnotimminentyet.Infact,apartfromasmallamountoftechnologyenthusiastswho
aimatreducinginsurancecosts,ahighnumberofcustomersstillconsiderstheinteractionwith
intermediariesimportantandworthofextracosts[56].
4.ASWOTAnalysis
Theabovediscussionshouldhaveprovidedthereaderwithabroadoverviewofpotential
applicationsofblockchaintechnologyintheinsurancesector.Asseen,advantagesappeartobe
numerous.Nonetheless,onlyafewprototypesexistsofar,andithasbeenestimatedthatblockchain‐
basedapplicationswillbeavailabletothewiderpubliconlyin10–15years[5].
StartingfromtheconsiderationsdrawninSection3,inthefollowingaSWOTanalysis
summarizingadvantagesanddisadvantagesofthistechnologyisprovided(Table1).Theobjective
hereistoabstractfromthespecificdomainconsidered,i.e.,insurance,andtoperformananalysis,
whichcouldpotentiallybehelpfulinavarietyofcontexts/sectors.
Thestrengthsofblockchaintechnologyaremainlyrelatedtothetechnologicalaspectspresented
inSection2.Byremovingintermediaries,thecostofmoneytransferscanbelowered(e.g.,bank
commissionsceasetoexist).Transferscanalsobemadefaster,ascryptocurrenciesaredirectlymoved
fromawallet’saddresstoanotherwithoutintermediatesteps(asitusuallyoccurs,e.g.,inoverseas
banktransfers).Smartcontractsprovideahighdegreeofautomation.Transparencyisguaranteedas
well,astheblockchaincouldbeaccessedworldwide.Inaddition,sinceeveryonecouldpotentially
writeontheledger,theblockchaincouldbecometherepositoryofahugeamountofinformation,
whichcouldbeusedfordataanalyticsindifferentsectors(notnecessarilyrelatedtoinsuranceand
finance,suchasmedicine,education,etc.).Theunderlyingcryptographicmechanismguaranteesthat
dataarenotmodifiedandthattransactionscouldnotberepudiated.Finally,thereplicationofthe
blockchainoneachnetworknodeensuresthattheblockchainwouldsurvivetounexpectedevents.
Themostrelevantweaknessesarerelatedtoscalability,energyconsumptionandperformance.
Infact,atpresent,thenumberoftransactionsthatcouldbehandledpersecondisextremelylow
whencomparedtotraditionalsystems(mainlybecauseofthecomputationalpowerrequiredto
validatenewblocks).If,atthepresenttime,blockchain‐basedtransactionsarequickerthan
traditionalbanktransfers(onaveragetheyrequirefewsecondstoseveralminutes,insteadof1–2
days),forinstantpaymentsandforotherkindsofapplications,performanceshouldnotbeadequate
toneeds.Inthisrespect,itisworthoutliningthatsomeblockchainplatformsarechangingtheprocess
ofvalidatingblocks,reducingthecomplexityofthemathematicalproblemtobesolvedand
restrictingthepossibilitytoperformminingonlytoasubsetoftrustednodes.Apartfromtime,space
isalsoanissue,sincedataarereplicatedoneachnetworknode.Tomakeanexample,theBitcoin
blockchainrequiresmorethan170GBofstorageoneachnetworknode[57].Inaddition,theamount
ofenergyconsumedbynetworknodes,andthecostofthehardwarerequiredtovalidatenewblocks
isextremelyhigh,estimatedaround6$pertransaction[58](thoughitmustbeunderlinedthatseveral
initiativestolimittheamountofconsumedenergyarecurrentlyunderdevelopment[59]).


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Table1.SWOTanalysisoftheadoptionofblockchain.
PositiveNegative
Internal
Strengths
‐ Fastandlow‐costmoneytransfers
‐ Noneedforintermediaries
‐ Automation(bymeansofsmartcontracts)
‐ Accessibleworldwide
‐ Transparency
‐ Platformfordataanalytics
‐ Nodataloss/modification/falsification
‐ Non‐repudiation
Weaknesses
‐ Scalability
‐ Lowperformance
‐ Energyconsumption
‐ Reducedusers’privacy
‐ Autonomouscodeis“candyfor
hackers”
‐ Needtorelytoexternaloracles
‐ Nointermediarytocontactincase
oflossofusers’credentials
‐ Volatilityofcryptocurrencies
‐ Stillinanearlystage(no“winning”
blockchain,needofprogramming
skillstoreadcode,blockchain
conceptsdifficulttobemastered)
‐ Sameresultsachievedwithwell‐
masteredtechnologies
External
Opportunities
‐ Competitiveadvantage(ifeffortsto
reduce/hidethecomplexitybehind
blockchainaresuccessful,orincaseof
diffusionofIoT)
‐ Possibilitytoaddressnewmarkets(e.g.,
supportingcarandhousesharing,disk
storagerental,etc.)
‐ Availabilityofahugeamountof
heterogeneousdata,pushedinthe
blockchainbydifferentactors
Threats
‐ Couldbeperceivedas
unsecure/unreliable
‐ Lowadoptionfromexternalactors
meanslackofinformation
‐ Governmentscouldconsider
blockchainandsmartcontracts
“dangerous”
‐ Medium‐longterminvestment
‐ Notsuitableforallexisting
processes
‐ Customerswouldstillconsider
personalinteractionimportant
Thefactthat,onceinformationisencodedintheblockchain,itisimmutableandaccessibleby
everyoneisanotherweakness,andcouldharmusers’privacy.Tomakeanexample,everyonecould
checktheamountofmoneyownedbyaperson,byanalyzinghis/herincomingtransactions.Should
othertypesofinformationbestoredintheblockchain(e.g.,medicalrecords),thisissuewouldbecome
evenmorerelevant.Tocopewithprivacyissues,somesolutionstoanonymizepayments/transactions
havebeenproposed[60–63].
Theimmutabilityandself‐executionofcodecouldbeanotherweaknessforblockchain,since
smartcontractscouldbecome“candyforhackers”[9].Infact,hackerscouldexploitbugsinsmart
contractstostealmoney,asitrecentlyhappenedontheEthereumnetwork,where,inthemost
famousattackofthiskind,around$60millionwere“stolen”inJune2016.Evenassumingthatsmart
contractsarefreeofbugs,someapplicationswouldstillneedexternaloraclestoinjectinformationin
theblockchain.Theweakestpoint,inthiscase,wouldbecometheoracle.Assaid,theconsequences
ofinjectingintheblockchainwronginformationcouldbepartiallymitigatedbyrelyingonmorethan
oneoracle,eachgettinginformationfromdifferentsources.
Apartfromtechnicalaspectsdiscussedabove,otherweaknessesaffectblockchainusability.First
ofall,theimpossibilitytoreceiveassistanceincaseofcredentialsloss(eventhoughthisweakness
couldbepartiallyremovedbyrelyingontrustedservices,asexplainedinSection3).Anotheraspect
iscryptocurrenciesvolatility,whichcouldbecomealimitationtotheadoptionofblockchain‐based
payments.Infact,giventhefactthatcryptocurrenciesaresubjectofspeculationandconsideringthat

FutureInternet2018,10,2011of16
technologyisnotfullymatureyet(andbugsfrequentlyappear),valueofcryptocurrenciesshowhuge
fluctuations.
Anotherweaknessisrelatedtothefactthatdevelopmenttoolsarestillinanearlystage,and
standardsfordevelopingblockchain‐basedapplicationshavenotbeendefinedyet.
Finally,itisworthremarkingthat,insomecases,blockchainwouldnotbethemostsuitable
technologytouse,asexisting,well‐masteredalternativeswouldenabletheachievementof
comparableresults[64].
Opportunitiesaremainlyrelatedtowhetherthemarketwouldembracethetechnologyornot.
Atthepresenttime,interactingwiththeblockchainrequiressometechnicalskills(e.g.,
masteringtheconceptofblocks,installingawallet,etc.).Severaleffortsarecurrentlycarriedoutin
ordertoreduce/hidethecomplexitybehindthetechnology(e.g.,thedevelopmentofbrowserplugins
whichletuserseasilyinspecttheledger[65],thecreationofuser‐friendlywallets[66],etc.).Should
theaboveinitiativesbesuccessful,companiesprovidingblockchain‐basedapplicationsandservices
(and,intheinsurancemarket,companiesofferingblockchain‐basedpolicies)couldhavea
competitiveadvantage.ThisadvantagewouldbecomelargerincaseofanincreasingdiffusionofIoT,
assmartcontractscouldbecodedtoautonomouslymakedecisionsbasedondataacquiredbysensors
[39–41].
Anotheropportunityisrelatedtothepossibilitytoaddressnewmarketsandcreatenewtypes
ofservices,mainlybyleveragingDAOsandlowtransactionsfees.Blockchaincouldbesuccessfully
usedtosupportthesharingeconomy,fromcarandhousesharing[67]todiskstoragerental[68](and,
inaninsurancescenario,tosupportmicro,on‐demandandpeer‐to‐peerinsurances).
Finally,shouldahighnumberofactorswritedataontheblockchain,innumerablenew
applicationscouldappear.Asamatterofexample,aperson’spreviousmedicalhistorycouldbe
easilyretrievedbydoctorsincaseofurgency;blockchaincouldbecomearepositoryofmedicaldata
whichcouldbeusedbyresearchscientists;blockchain‐basedsupplychainscouldbemoreefficient
asdatacouldbesharednearlyinstantaneouslyamongheterogeneousinvolvedactors;inan
insurancescenario,datacouldbeusedforfraudsprevention,policiespersonalization,etc.
Nonetheless,thetypeandimpactoftheseapplicationswouldbeafunctionoftheamountandquality
ofinformationrecorded.
Threatsarelinkedtodifferentexternalcauses.Firstofall,thereisstillariskthatthemarket
distruststhistechnology,perceivingitasunsecureorunreliable,duetobugs,cryptocurrencies
volatility,etc.
Otheractorscouldthinkthatitistoocomplicated,andtheadoptionrateonaworldwidebasis
couldbelow.Asacountermeasure,suchactorsshouldreceiveasuitabletrainingtobemadeaware
oftheadvantagesofthistechnology.Alternatively,effortscouldbecarriedouttohidetheunderlying
complexity.
Particularattentionshouldbepaidtolegalregulations,whichcouldthreatentheadoptionof
blockchain.Forinstance,theregulationoftheuseandjurisdictionofsmartcontractsisstillunder
debate.Tomakesomeexamples,therecouldbesituationsinwhichtheoutcomeofasmartcontract
wouldnotbeconsideredaslegalbyacourtunderexistinglaws(e.g.,asmartcontractregulating
transactionsofillegalgoods)[69].Similarly,therecouldbesituationswherehackersexploitsmart
contractsbugstostealmoney.Somegovernmentscouldconsiderblockchainandsmartcontractstoo
“dangerous”,thusresultinginalimitationoftheadoptiononalargerscale.
Concerningpracticalaspects,blockchain‐basedapplicationsareamedium‐ tolong‐term
investment,andtheycouldnotbesuitedforintegrationinalltheexistingprocesses.Infact,as
previouslydiscussedfortheinsurancesector,someclaimswouldstillneedtobemanuallyprocessed,
asnotallthedamagescouldbeevaluatedbysensors.
Finally,shouldblockchaintechnologybecomeapraxis,itcouldimpactoncompanies’
relationshipwiththeircustomers.Firstofall,somecustomerscouldrefusetoadoptit,astheymight
stillconsiderthepersonalinteractionimportant.Similarly,companiesthatinvestedinhumancapital
toofferagoodcustomerservicecouldlosemarketshare,asthecompetitioncouldbemovedfrom
thequalityofserviceprovided,toitsprice.

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5.Conclusions
Blockchainisreceivinganever‐growingattentionfromresearchandindustry,andisconsidered
abreakthroughtechnology.Theincreasingenthusiasmreportedinthemedia,however,couldbias
anobjectiveevaluationaboutwhethertoinvestornotinthistechnology.Theriskisthatacompany
decidestoembraceblockchaintechnologybecauseitisfascinating,withoutreflectingonwhetherit
ismatureenoughforanadoptionineverydayactivities,andbyawiderpublic.
Tohelpcompaniesreducetheriskofchasingdecentralizationforthesakeofitselfjustbecause
blockchainisnowunderthespotlight,inthispaperwepresentedanoverviewofpotential
applicationsandusecasesofblockchainandsmartcontractsintheinsurancesector.Wealsodrafted
amoregeneralSWOTanalysisofblockchain,whichcouldbepotentiallyappliedtoavarietyofother
sectors.
Wedecidedtofocusoninsurancebecausethisisasectorwhereblockchainhasnotbeenfully
exploredyetandinwhichblockchaincouldhavearelevantimpactonseveralprocessesand
applicationscenarios.Hence,usecasesinthissectorcouldbehelpfulinidentifyingadvantagesand
disadvantagesofthetechnologyitself.
Theconsiderationsmadethroughoutthepaperhelpedusanswerthekeyquestionsreportedin
theintroduction.
Concerningquestion1,“Arethereclearusecasesexploitingblockchaintechnologyandsmart
contractsintheinsurancesector?”,atthepresenttimeanumberofusecasesandprototypesolutions
havebeendevisedinthissector.Inparticular,blockchainandsmartcontractscouldbesuccessfully
usedtospeedupclaimsprocessingandreduceoperatingcosts.Inthisscenario,asmartcontract
couldtriggerreimbursementsbasedondataacquiredfromphysicalsensors(e.g.,dampsensors
installedonroofs)orfromtheWeb(e.g.,weatherorflightsdelaydata).Inanotherscenario,data
entry/identityverification,theblockchaincouldbeusedastheinfrastructuretoverifyaperson’s
identity.People’sidentitiescouldbelinkedtoablockchainaddress;then,eachtimeapersonneeds
tobeverified(e.g.,toopenabankaccount),he/shecouldsendasignedtransactionfromhis/her
address,byprovinghe/sheistheaddress’owner.Inthecontextofpremiumcomputation/risk
assessment/fraudsprevention,theblockchaincouldactasasharedledgerrecordingaperson’s
previoushistory(previousclaims,committedinfractions,medicalhistory,etc.).Insurancecompanies
couldrelyonthesedatatoidentifyfrauds,ortoautomaticallycomputethepremiumofapolicy.In
thescenarioofpay‐per‐use/micro‐insurance,blockchainandsmartcontractscouldbeusedto
automaticallyactivate/deactivatepoliciesandcovers,basedondatacollectedbysensors.Finally,in
thelastidentifiedscenario,i.e.,peer‐to‐peerinsurance,blockchainandsmartcontractscouldbethe
keytechnologiestoenableashifttoafulldecentralization,e.g.,supportingtheautomatic
managementofself‐insuredgroups’funds.
Concerningquestion2,“Incasewewanttoadoptablockchain,whatisthemostsuitable
blockchainarchitectureforourneeds?”,aspresentedinSection3,thearchitecturalsolutionsshould
bechosenbasedonthecompany’sdecentralizationneeds.Ingeneral,forthebackendaprivate
blockchainmaybesufficient.Privateblockchainshavebeenfrequentlydemonized,sinceusingan
instrumentoriginallyborntofosterdecentralizationinafullycentralizedenvironmentmayseema
contradiction.Nonetheless,theyhavetheadvantageofkeepingtrackofthesenderofatransaction
andofallthepreviousoccurredtransactions,reducingtheriskofdatatampering.Furthermore,
togetherwithsmartcontracts,theycouldbeusedtoincreasetheautomatizationofexistingtasks.In
casemultipleinstitutionsneedtoaccessdata,aconsortiumblockchainmaybepreferable.This
blockchaincouldbemaintainedbynodesbelongingtothedifferentinstitutionsoftheconsortium,
andcouldbeusedasasharedledger.Finally,publicblockchainscouldbeusefultomanage
(automatic)paymentswithexistingcryptocurrencies,orwhenthereistheneedtoprovidetrust
(usinganunmodifiableledger)betweenparties.
Concerningquestion3,“Isblockchaintechnologymatureenoughforinsurance?”,whilewe
believethatblockchainisatremendousinventionthatcouldhaveanimpactsimilartotheWorld
WideWebinthe90s,wealsothinkthatthistechnologystillneedsseveralimprovementsbefore
becomingmainstream.Thereasonsbehindthisstatementarevarious:firstofall,acurrentlimitation

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ofexisting(public)blockchainsisscalability.Infact,thenumberoftransactionspersecondislow,
andthenetworkfrequentlysufferscongestions.Inapay‐per‐useinsurancescenario,thesefacts
wouldtranslateintolongwaitingtimesbeforethedesiredpolicycoverisactuallyactivated(and,
whatifanaccidentoccurswhilethetransactionactivatingacoverwaswaitingforvalidation?).
Second,awinningblockchainisstillmissing.Thatmeansthatacompanycoulddevelopan
applicationexploitingagivenblockchain,anddiscoverafterfewyearsthatthechosenblockchainis
nolongersupportedbythewidernetwork.Usingapublicblockchainsupportedbyfewnodescould
increasetheriskofattacks(asfewnodescouldcontrolthemajorityofthenetwork).
Third,theinteractionwiththeblockchainisstillcomplexforthe“averageuser”.Masteringthe
conceptsofwallet,transaction,mining,etc.requiressometechnicalbackground.Atthesametime,
Bitcoinhasfrequentlybeenassociatedwithapyramidschemeorafraud.Asaconsequence,thereis
stillalotofmisinformationonblockchain,andpeoplecouldstillprefer“traditional”applications
ratherthandecentralizedones.Furthermore,cryptocurrencyvolatility(whichsometimesisdriven
bymedianews)couldscarethepotentialusersofdecentralizedapplications.
Finally,theresourcesandbestpracticestodevelopafree‐of‐bugssmartcontractarestill
insufficient.Smartcontractsfrequentlyexperienceattacks,insomecaseswithdisastrous
consequences[70].Thisaspectcouldespeciallythreatenpeer‐to‐peerinsurances,whichwould
widelyrelyonsmartcontractsfortheirgovernance.
Fortheabovereasons,wedonotexpectblockchain‐basedinsuranceapplicationstoappearin
theverynearfuture.
Itmustbesaid,though,thattheblockchaincommunityisdevotinggreateffortstoimproving
theaboveweaknesses.Regardingscalability,LightningNetwork(forBitcoin)[71]andRaiden
Network(forEthereum)[72]arecurrentlyunderdevelopment.Bothsolutionsareinvestigatinghow
tomixonlineandofflinetransactions,inordertoreduceminingcostsandtime.Concerningeasing
theinteractionwiththeblockchain,someapplicationsthatletuserseasilyinteractwithblockchain‐
basedapplicationsusingtheirbrowsersormobilephonesarecurrentlyunderdevelopment[65,66].
Concerningsmartcontractssecurity,bugbountiesprogramsaremoreandmorefrequent,andawide
communityofblockchainwhitehathackersiscurrentlybeingcreated[73].
Oncetheaboveinitiativesaresuccessful,blockchaintechnologycouldbegraduallyinsertedin
everydaylives.Inthemeantime,insurancecompaniesarestronglysuggestedtostartinvestigating
it,byacquiringtherequiredcompetencies,andbycreatingsomeprototypesolutions.Such
prototypescouldbeusefultoevaluatehowexistingprocesseswouldbeinfluencedandtowhat
extentthistechnologywouldbeacceptedbythestafforbycustomers.
Whatisclearalreadyisthatblockchainisbringingaradicaltransformationtothewayweact
andthink,andweallshouldbepreparedforthischange.
AuthorContributions:Thepaperwaspreparedbyallthefiveauthors,whichwereinvolvedinastudyof
BlockchaintechnologyintheInsuranceSector.Alltheauthorsequallycontributedtothemanuscript.Valentina
GatteschifocusedontechnicalaspectsrelatedtoBlockchainandonStateofArtapproachesandapplications,
undertheguidanceofProf.FabrizioLambertiandProf.ClaudioDemartini,whoalsoprovidedassistancewhile
shapingandrevisingthepaper.ChiaraPrantedaandVíctorSantamaríaprovidedtheirknowledgeofthe
InsuranceSectorandhelpeddevelopingthediscussiononInsurance‐relatedusecasesaswellasrevisingthe
paper.
ConflictsofInterest:Theauthorsdeclarenoconflictsofinterest.
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