The Future Actuary recently posted an article by Rui Dong entitled, “What is Bitcoin?” Seeing as there are literally hundreds, if not thousands of these articles floating around the internet (oh look – I wrote one too!) I almost passed it up. Except that this particular Bitcoin…
These are the people who, by using complex mathematics, calculate what premiums your insurance provider should charge. Life insurance, pensions, social welfare programs, annuities and more – these are the brilliant minds who assess the risk. So what does Mr. Rui Dong have to say about Bitcoin? His article starts out like another you’d expect, Bitcoin is the first cryptocurrency, frequently asked questions, Bitcoin has changed digital assets forever, Satoshi Nakamoto gets mentioned, how Bitcoins are created, etc, etc, etc. We know the drill. So what’s new?
Also read: What is Bitcoin?
Mr. Dong asks the question “Why is this [Bitcoin] important to the insurance industry” and goes on to explain just how the blockchain could change the insurance world as we know it. When we hear Bitcoin and insurance mentioned in the same statement we are often thinking about Aon or other companies that offer Bitcoin insurance, but what does the blockchain mean for insurance providers? Now you’ve got my attention.
“What about decentralized insurance? This might still be far down the road, but one thing is for sure, technology is breaking up the traditional value chain. With technological advancements, we will see more policies being sold online which are managed by independent brokers, claim adjusters, underwriters and actuaries. “ – Rui Dong
He doesn’t go much further beyond that, but he does give us some ideas on what this would look like and mean for insurers and customers alike.
Insurers run massive databases that are separate from other insurers. These databases cost millions to run, maintain and tack on additional costs because they do not talk to each other. Filing a claim and reconciling audit requests take a huge amount of time and resources, but a decentralized and shared databases would do away with that.
The article goes on to point out that anyone would be able to write their own insurance policy and find a third party to assume the risk. After this, premiums and payouts can be automatically treated, so it’s now vastly cheaper. Maybe we didn’t need The Affordable Care Act after all. With the blockchain insurers could adjust premiums in real-time and record events instantly.
This is just another example of how the greatest thing that Satoshi Nakamoto gave us was not cryptocurrency, but the blockchain. Platforms such as Ethereum, Namecoin, and Ripple understand this. As Mr. Dong points out:
“What we have here is a quantum leap towards what money and digital assets can be in the 21st century. “
What do you think about Bitcoin and risk? Comment below!
Images from Shutterstock.
Last modified: January 8, 2020 3:18 PM UTC