Will the states and authorities of tomorrow establish blockchain technologies as the foundation of modern social security systems?

Recognizing the full potential that blockchain technology offers us, one is overcome by this feeling, which many radiate from the community. This feeling of departure. The knowledge that many business cases will change in all areas of industry.

At the beginning of the year 2018, Paul Mizel, Fabian Raetz, and Gamal Schmuck left their career as IT consultants in the insurance industry behind to develop an open decentralized autonomous insurance platform (Asure platform) based on the Ethereum Blockchain.

Vision

Our vision is that

“People around the world enjoy their lives without having to worry about any risks or losses.”

Challenges

The world’s state social security systems are facing great challenges. Demographic change and increasing digitalization are creating a great deal of trouble for industrialized nations. At the same time, many countries in the world still have no or very poor social security systems. [1]

Research results show that social security plays a central role in economic and political development in developing countries. People who do not have access to social security systems are at risk of falling into poverty if they are struck by a stroke of fate such as illness, crop failure or disability. They may then have to liquidate savings, sell livestock and other means of production and send their children to work instead of the school in order to finance daily expenses. [2]

People who enjoy basic social security are more willing to invest in education and physical capital, which entail additional risks, but also the prospect of income improvements. Empirical studies suggest that the existence of social security systems, especially in the informal sector, strengthens the propensity to invest and thus promotes economic growth precisely where this best contributes to poverty reduction. [3]

At Asure, we want to contribute to reducing disease and poverty in our world by ensuring that everyone has access to good social security.

First solution — pay-as-you-go social security system based on blockchain

We enable governments around the world to establish pay-as-you-go social security systems and assist in migrating existing ones to the Asure platform so they take advantage of the blockchain technology.

Which social security systems will be supported?

Depending on the state of development, governments offer various social security systems such as

■ pension scheme,

■ health insurance,

■ unemployment insurance,

■ accident insurance, and

■ nursing care insurance.

At Asure, we believe that all these insurance models could be implemented on Ethereum and the Asure platform in a very efficient manner. We will work with governments and support them in implementing their social security systems.

Social security systems can be funded by capital, via tax receipts, pay-as-you-go systems and a combination of them. [4]

Why pay-as-you-go systems?

Pay-as-you-go systems are successfully used to fund social security systems. Premiums will be used to pay benefits directly and no or a small reserve is build. Countries, in difference to private insurance companies, can guarantee continuous premiums by making social security systems mandatory and therefore don’t need coverage capital.

Since no capital has to be saved with pay-as-you-go systems, the first generation is also directly entitled to payouts without ever having paid premiums (unfunded liability). Therefore, pensions can be paid immediately after introduction. [6]

Why on blockchain?

An unchangeable and verifiable history of transactions is of great relevance for the pay-as-you-go systems, and the blockchain as a technology brings it directly with it, you’ll never need paper to lose again.

Operational costs of the german pension system are more than three billion Euro in 2017 [7]. Due to the high degree of automatization, the blockchain can be used to reduce costs and increase the value of social securities by using the information that accompanies social security systems.

Transparency in social security systems also means that governments’ reputational advantages will increase. Trust in a social security system becomes less dependent on trust in the authorities, but can be verified by everyone through the use cryptography. The available data create new possibilities for the development of social insurance based on artificial intelligence. For example, data can be used in predictive models to predict the demand and success of social insurance by using new insights into relationships and causalities. As a result, further improvements and possible risks can change better forecasts.

We see single points of failure all the time in the form of outages, data breaches and data leaks of centralized systems. In decentralized networks, no one node going down can take down the entire network, so no matter how many users come and go, Asure platform should remain up and running. All data are cryptographically coupled and forgery-proof.

Asure — Proof of Concept (PoC)

Soon, we will publish our PoC of the german pension system which demonstrates how to implement and how to take advantage of the blockchain technology to implement social security systems.