In this latest Opinion piece, Igor Trambovetskiy, Senior Developer at DataArt, (pictured below) looks at the impact blockchain is having on car insurance, and tries to assess how quickly the process of claims settlement being inextricably linked to data trails, becomes the new normal for insurers and brokers alike.
With blockchain placing itself firmly at the head table of technology, it was only a matter of time before it began to be seriously considered for integration into car insurance. It is one of the most popular technology innovations in recent years. Tens of thousands of articles and hundreds of books have been read and videos about blockchain have had millions of views. Blockchain hubs and even blockchain cafés are cropping up in many cities.
It is not surprising that blockchain is particularly alluring to the car insurance sector. The technology is often portrayed as being simply a distributed and decentralized database. But this database does more than store information itself; it stores the history of every modification made to the information stored. Moreover, the decision-making system for changing data precludes opportunities to hack or falsify data, making it very attractive to software developers, who appreciate the ability it gives to verify the authenticity of data.
For any vehicle accident, even a relatively minor one, a claimant needs to both obtain a repair estimate and to fill out a number of forms. For a small prang, the process usually involves no more than lost time. But in a case of a more serious incident, the situation can become much more complicated.
So, what can be done to improve the process and make assessment more accurate? Firstly, what does old-fashioned automation have to offer? Let’s start with the installation of a device such as a black box, in a vehicle. This device will periodically record the car’s telemetry data – speed, acceleration, mileage, and possibly location. Unfortunately, however, there is a small issue with retention of this data because traditional databases are susceptible to attacks, and data can be lost or it may be impossible to authenticate.
Enter blockchain. Rather than exposing the data to potential corruption of one sort or another, the car telemetry could be sent immediately to a blockchain. To avoid “man-in-the-middle” vulnerability, this could be done blockchain through a secure channel (TLS) with the help of a reverse proxy tool such as Nginx or another similar tool. The inherent security factors in blockchain would impart the ability to be certain the data is authentic, which in turn would help accelerate the decision-making process for the insurance company.
It would be much easier for the insurance agent to assess the validity of the claim if he or she had the telemetry data from the period preceding the accident. The amount of paperwork would be significantly reduced because everything would pass through a blockchain: information about each incident, each insurance payment and each report from a service center. In fact, the whole story of the car and driver could be kept in a blockchain. This information, which would be almost impossible to forge, would have a wide range of uses across several related situations such as a decision on the level of a fine or when the car is sold. The entire history of the car would be open and transparent. With this information available, it would even be possible to create a bounty system in which a driver could receive rewards for good driving. And, of course, blockchain could facilitate financial arrangements to pay for insurance, services, fines and so on.
While this is all possible from a theoretical standpoint, there are certain issues that would have to be addressed before a blockchain insurance system went into production. A blockchain is not without its challenges. It has issues with high volatility, low speed, poor scalability, increased memory requirements and lack of anonymity.
HOW DO WE SOLVE A PROBLEM LIKE SHARING DRIVER DATA?
Anonymity issues are a particular stumbling block when weighing the pros and cons of blockchain. All data captured in a blockchain is available to all network members and it is almost impossible to remove them. This is, of course, a very serious problem for systems that require confidentiality. However, this challenge is not insurmountable, and can be addressed by introducing off-chain solutions to store private and sensitive data. The off-chain solutions can post anonymized data to blockchain if required or simply keep it safe in the old-fashioned manner, allowing access only by authorised parties.
In conclusion, blockchain is a technology still in the early stage of development. Finding a proper strategy to adapt it should be a cornerstone of any car insurance provider. All innovation processes have inherent risks, and they should always be evaluated. It is easy to dismiss the current blockchain fever- its success depends on so many factors. But it never hurts to be prepared for the future – start from a small R&D project and see how it positions you in the market. We see blockchain as a dominant insurance technology in the future.