In Problems: Usually these conditions are defined not in

In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language.Basically, the insurance policy is a piece of paper with a list of “if this then that” and signatures of both sides.  Problems: Usually these conditions are defined not in a trivial way and as insurers’ goal is to pay policyholders as less as possible, usually, customers are dissatisfied and usually feels and are fooled due to lack of experience. On the other hand, customers perform fake claims, lie and cheat to get the payout. In the end, both sides are not happy with each other and some of those issues even lead to court.Limited growth in mature marketsCost reduction pressures.Solution: Smart Contracts allows us to have a policy written as a code, executed in a decentralised way and without any human intermediary.Using IoT you can track device state daily, hourly, monthly?—?depending on the device type. Store that data, monitor the changes using AI and in the case of misbehaviour initiate the proved by actual data claim to Smart contract. The smart contract would go through “if and else” conditions to check various cases, payout sizes, etc. and initiate payment automatically directly to customer’s wallet.Use Cases:Innovating insurance products and services for growth, increasing effectiveness in fraud detection and pricing, and reducing administrative cost.The Catastrophe Swaps and Bonds are tradable financial instruments that insurer uses to protect against major catastrophe losses. Based on catastrophe triggering events like hurricanes or typhoons, payout can be initiated between Insurer and Investor. Blockchain smart contract makes payment settlements happen in hours after the catastrophic event. Today, it takes weeks and months to settle such payment transactions after the catastrophe event.Term life insurance: Term Life Insurance Smart Contract can be created between the insured and Insurer, which will pay death benefits to the beneficiary upon the death of the policy holder. Smart Contract can be connected to the death registries. On receiving a notification of a person’s death, Smart Contract can automatically verify the person is covered, then initiate and settle the claim payment to the beneficiary. Generally, dependents or beneficiaries are not aware, if the person who passed away had insurance and hence do not file a claim, or file late.  In this scenario, Smart Contract eliminates the need for claim submission request notification as the contract automatically process and settles payment on receiving notification from death registry.Micro Insurance Claims: Insurer will be happy to cut down administrative cost that are incurred in handling micro insurance claims like in farm insurance. So weather triggering events like flood, heavy rainfall or drought can be used to address claims in micro insurance. Automation would also help insurers to save claim administration cost. This in turn would lead to bring down the premium and make insurance affordable for the farmers.Flight travel insurance: The smart contract solution automates claim payout instantaneously to the affected passengers based on the flight data feeds.Reinsurance Recoveries: Smart contracts can be extended to back office transactions that takes place between insurers and reinsurers. Usually after a claim is settled, insurer verifies for any reinsurance contracts and works with reinsurers for reinsurance recovery. A smart contract can be placed on a Blockchain platform to initiate recovery transaction as soon as the claim is settled.Sensor based Insurance Internet of Things (IoT): Cars, electronic devices or home appliances can have their own insurance policies registered and administered by smart contracts in a blockchain network, automatically detecting damage first and then triggering the repair process, as well as claims and payments.Administrative Costs: Blockchain may reduce administrative/operations cost through automated verification of policyholder identity and contract validity, auditable registration of claims and data from third parties (e.g., encrypted transaction of patient data between doctor and injured party accessible by insurer to verify payment), and payouts for claims via a blockchain-based payments infrastructure or smart contracts.Usage based Insurance: Instances where a user becomes a primary user of property for a miniscule period of time, like renting a car, shelter (Airbnb) can be recorded on Blockchain and the claims can be made using smart contracts. With all the  information available, the premium can be adjusted based on policyholder’s history.P2P Insurance: The insurer would provide a marketplace-like platform where customers can post their insurance demand, which could be either a standardized product or even a specific demand. The insurer then would use its “risk intelligence” and risk models, based on their historical data, to perform a premium calculation to post the expected return, after subtracting their margin off course. Posting this premium calculation, interested investors can bid or subscribe to the demanded insurance. This can either be done as a group through crowdfunding, or by individuals in a P2P way. This could depend on the kind of insurance request, the available resources of the investor and his or her risk appetite. Besides the administration being done in a decentralized ledger, with the use of smart contracts, one could guarantee the payment from the investor to the customer in case the event for which the customer posted their insurance demand happens. The smart contract is thus programmed as a traditional guarantee, but without the need of a bank. By doing this in a blockchain, the administration and execution processes are simpler, almost fully automated, transparent and cheaper than in a traditional set up. Besides that, the investors know their maximum exposure as the amount defined in the smart contract. The insurer can also fulfill the role of assessor of the damage to verify the validity of the insurance claim. But this could as easily be outsourced to a third party and by connecting the blockchain to other ledgers. This validation can then be verified automatically.Crop insurance: Collaborating with weather experts to automatically process fraudulent crop insurance claims.Health insurance: A blockchain that connects hospitals, physicians, lab vendors and insurers could enable a seamless flow of health information for improved underwriting and validating of claims.Subrogation in Auto Insurance Claims: Subrogation refers to the process when the insurer recovers the claim amount from the insurance company of the at-fault driver.  In an auto scenario, a shared ledger could be hosted on a blockchain connecting the liable insurer, claiming insurer and independent claim adjustors. Key data points such as past driver behavior along with accident/claim information could be shared among various stakeholders to help determine liability. Subrogation claims can be processed on the spot using predetermined conditions built into smart contracts. Sources: