New Business Models Inspired by Blockchain Across Industries

Decentralization empowers collaborative insurance models and enables the creation of niche products like hurricane insurance.

Turning business process into software

Much like how the prevalence of open-source has changed the way we access software today, for the past few years, blockchain is also changing how we use and access insurance services.

Blockchain and decentralization are no longer just trends. It’s happening, and it’s affecting the insurance industry. This was one of the key points brought up by Stephan Karpischek, a co-founder of Etherisc, at the Blockchain Summit Crypto Valley held at Zug, Switzerland.

Stephan Karpischek at the Blockchain Summit Crypto Valley (Picture: Tobias Noack)

During a panel discussion, Stephan noted how blockchain has already made an impact in the insurance industry from the creation of new products and services to inspiring new people of different mindsets and cultures to participate. In insurance, the blockchain technology has already gone far beyond cost savings and improving efficiency.

“There is a whole lot of change coming up for the traditional insurance companies. From our many conversations, we can already tell who is more prepared for these upcoming changes,” said Stephan. “I don’t think that reimplementing the same old products, processes, and systems will bring much change.”

“The core business process of insurance will become a public utility, a set of smart contracts on public blockchains.” — Stephan Karpischek, Etherisc

Open source stimulates new business models

One of the biggest, if not the biggest disruptive factors to traditional insurance is that smart contracts are open-source. They are fully transparent and free to access, use, and copy.

“The business models in a decentralized insurance economy will look very different to the current business models in the industry. Sharing and collaboration are the default on a public blockchain.” — Stephan Karpischek, Etherisc

This is counter-intuitive to traditional insurance businesses where a single owner or a central authority has control. Instead, this empowers an ecosystem of mutual and cooperative models or as Stephan envisions “insurance like it should be.”

Stephan Karpischek in the panel discussion (Picture: Tobias Noack)

Consequently, new insurance models outside the scope of traditional insurance providers are being created because of the open-source ecosystem. Etherisc’s Flight Delay DApp saw immediate success after its release on September 8, 2016. At launch, the smart contract issued 77 policies, collected 3.2 ETH, and $1,200 in premiums. It then paid out six delayed flights, resulting in a net profit of 3 ETH.

More recently, a hurricane insurance policy was developed on Etherisc’s platform catering to residents of Puerto Rico.

“The hurricane insurance is the first use case that embodies our belief in what insurance should achieve — helping people solve real problems and manage risks in their communities.” — Stephan Karpischek, Etherisc

Looking to improve

While decentralized insurance is still a relatively new concept, Stephan believes that we will see a lot of growth in the next years.

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