Chain gang

Insurers make a bet on blockchain

blockchain in insurance industry
Risk and reward. Source: Getty

Germany’s insurance industry isn’t known as an early adopter of new technologies. Manual data entry and studious double-checking leaves room for human error and incurs substantial labor and time costs. But risk-averse insurers are betting on blockchain to save money and increase accuracy.

Blockchain is a distributed database technology that’s the basis for cryptocurrencies such as Bitcoin. Each new block of data must be confirmed by a majority of computers in the network before it is added to the chain. The current blockchain boom is focused on applications beyond cryptocurrencies, using so-called smart contracts. The conditions are encrypted in the smart contract and will be automatically carried out when the terms are fulfilled, with less risk of fraud or human error.

Industries around the world are rushing to find use cases for blockchain. But while insurance companies such as Allianz, Liberty Mutual, Swiss Re and Munich Re are normally fierce competitors, in this brave new blockchain world they are banding together. A total of 13 insurance companies formed the industry consortium B3i Services AG to find development strength in numbers. “In a big natural disaster, we can immediately determine who is affected by losses and which insurers and reinsurers should receive which payments,” says Markus Tradt, B3i’s chief technology officer.

Billions in savings beckon

So far, one insurer has brought a blockchain consumer offering to market. France’s AXA last fall introduced Fizzy, which uses Ethereum-based smart contracts and real-time worldwide air traffic data to process payments for delayed flights. If your plane is more than two hours late, the insurance payout could potentially land in your bank account shortly after you land at your destination, without you having to file any additional paperwork.

Insurwave, the first blockchain-powered marine hull insurance, was launched this month by business consultants EY and software maker Guardtime. Danish shipping giant Maersk joined the pilot program last fall, with insurers Willis Towers Watson, XL Catlin, MS Amlin and ACORD participating as well. EY says Insurwave will cover more than 1,000 commercial ships this year, and the consultancy hopes to extend the coverage to global logistics, aviation and energy.

The major concerns for the insurance agency are protecting users’ personal data and their own trade secrets while creating systems that can interoperate with one another. B3i has been testing prototypes since last fall and hopes to take the first blockchain-based tools to market in 2019. It estimates participating insurance companies could save about 30 percent of their administrative costs.

In a study, Boston Consulting Group said the insurance industry as a whole stands to save $200 billion annually once blockchain technology matures, a time it says is still a few years away. Generally, firms share as little information with each other as possible, but to create a better blockchain future, they’re going to have to embrace the idea of working together. “The technology is most effective when it’s used by as many people as possible,” Mr. Tradt says.

Astrid Dörner is an editor for Handelsblatt based in New York City. Grace Dobush is an editor with Handelsblatt Global in Berlin. To contact the authors: and

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