How Smart Contracts Work

A look into how smart contracts are being used in the insurance industry. Could they be the solution to corruption?

As discussed in the Bitcoin group, smart contracts are the future and are revolutionizing the way contracts and services are managed around the world.

We're used to having insurance for our medical bills, lives and cars, but today's multi-trillion-dollar insurance industry also covers lots of other things. Legendary rocker Bruce Springsteen has his voice insured for $6 millionTraveler’s Insurance covers costs related to kidnapping. Pets are insurable, too. And the list goes on.

Well-established and valuable though it is, however, the insurance industry has plenty of problems — including inefficiency, fraud, human error and, most concerning of all, cyberattacks. In 2015, Anthem Insurance revealed a data breach that exposed the sensitive data of 78.8 million customers. Besides the incalculable losses stemming from identity fraud, the entire industry took a $375 million hit.

Blockchain’s ability to create trust in a trustless ecosystem through the use of public ledgers and fortified cybersecurity protocols has positive implications for the insurance industry's future growth. Along with artificial intelligence and big data, the potential that utilizing blockchain in insurance will unlock hinges upon three unique features in particular.



Blockchain optimizes the efficiency, security and transparency of the insurance industry. Distributed Ledger Technology (DLT) has beneficial applications for streamlining insurance claims processing, boosting cybersecurity protocols and even speeding up payment times.


insurance smart contract



Smart contracts enable blockchain users to transparently transfer anything of value without the interference of a middleman. Like physical contracts, smart contracts stipulate the rules between two parties. Unlike physical contracts, smart contracts can track insurance claims and hold both parties accountable.

Insurance policies could be written as coded, decentralized smart contracts in which an individual agrees to pay the insurance company money in return for the company's promise to help cover that person's future medical costs. Blockchain smart contracts will create immutable data based on an insurance policy owner’s records that can immediately accept or refute any insurance claims made to the company.


If any false or fraudulent claims are made by the policy owner (or if an insurance company no longer agrees to cover a condition previously agreed upon), a smart contract will immediately dissolve and the premium payments will transfer back to the individual. The process creates a sense of mutual trust between the two parties for two reasons: all data is transparently displayed, and the slightest contractual deviation results in restitution to the harmed party.


advanced insurance automation





Because the insurance ecosystem contains millions of insurers, healthcare providers and patients, it’s easy for the industry to get bogged down by money- and time-wasting inefficiency stemming from billions of forms, human error and poor communication between parties.


Digital ledger systems like blockchain can help automate outdated processes, save billions of hours of paperwork each year and reduce human error because all forms and data are safely stored along the chain.


Communication between important parties in an insurance claim can also be improved through distributed ledger technology. If stored on a blockchain, a patient’s medical history can be safely viewed by doctors and insurers to determine correct policies and procedures going forward.


blockchain cybersecurity in insurance




Blockchain's ability to safeguard sensitive information is especially enticing to an industry that heavily relies on data gleaned from being at the intersection of health, work and personal life.

Blockchain’s ledgers are decentralized, so they can't be corrupted or manipulated by one authority. Instead, all data is chronologically timestamped to ensure a clear recording of events.

And while blockchain data is encrypted, it's also completely transparent to members (nodes) on a chain — meaning that all nodes can view the actions of an individual whose true identity remains hidden. This system enables blockchains to quickly suss out any unusual behavior and take care of problems before they become major issues.


The insurance companies below lead the pack in implementing ledger technology.


blockchain applications insurance etherisc



Location: Munich, Germany

What they do: Etherisc is an open-source development platform that focuses on decentralized insurance applications.

Blockchain insurance application: Etherisc builds decentralized, blockchain-centric applications for different sectors of the insurance industry. The company is focused on using ledger technology to cut down on inefficiencies, namely high processing fees and extensive claim-processing times.   

Real-life use case: Etherisc has already developed six different decentralized insurance-related applications. One of them is a crop insurance app with which farmers identify their land and crops as well as any losses due to weather. Another app insures Etherisc members against potential crypto wallet hackings.


blockchain applications insurance beenest

Location: San Francisco,  California

What they do: Beenest is a decentralized home sharing platform for crypto-enthusiasts. Similar to AirBnb, Beenest users can book homes using the company’s Bee Token.

Blockchain insurance application: The company is teaming up with WeTrust to develop a blockchain-based insurance for Beenest homeowners. For now, the Bee Token can currently be used to book rooms in the San Francisco area with the aspiration to expand their processes abroad in the near future.

Real-life use case: Starting in late 2017, Beenest is still in the early stages of homeowner insurance for property damage. The company recently raised $15 million in a token sale to help fund development of a blockchain-backed insurance.  


blockchain applications insurance guardtime


Location: Irvine, California

What they do: Guardtime develops blockchain solutions across the cybersecurity, government, finance, defense and logistics industries.

Blockchain insurance application: Guardtime recently teamed up with logistics giant Maersk to implement a blockchain-based maritime insurance platform that will manage risk, use smart contracts and establish an immutable chain-of-shipping to help insurance companies thoroughly provide coverage.

Real-life use case: The company’s Insurwave platform is poised to manage the insurance processes for more than 1,000 vessels in the first year. The company also expects the platform to oversee more than 500,000 ledger transactions that deal with pertinent maritime insurance information.


blockchain applications insurance fidetiax


Location: Singapore

What they do: FidentiaX is the world’s first marketplace for tradeable insurance policies.

Blockchain insurance application: With FidentiaX, users are able to buy, sell or store their insurance policies on the company’s blockchain. Using tokenization, the blockchain-powered marketplace takes existing policies and puts them into the encrypted database. In real-time, users are able to cash out on their policies, buy policies from others or just find all their insurance information in one place.

Real-life use case: FideniaX recently created ISLEY, a blockchain-powered digital ledger for insurance policies. ISLEY gives customers a complete overview of their insurance policies, notifies them when their premiums are due and displays an immutable record of your entire policy history.



Location: Zurich, Switzerland

What they do: The Blockchain Insurance Industry Initiative (B3i) is a cohort of insurers formed to explore the usefulness of blockchain and Distributed Ledger Technology (DLT) in the insurance industry.

Blockchain insurance application: Formed in late 2016, the company’s mission is to use blockchain to improve the way data and payments are managed, reduce risk and to make insurance more affordable. They are currently working many applications dedicated to their mission.

Real-life use case: B3i’s first completed product is a blockchain prototype for property reinsurance contracts. With the participation of 38 insurers and brokers, the company was able to execute the entire reinsurance contract process on a secure blockchain.


blockchain applications insurance dynamis


Location: London, England

What they do: Dynamis is a peer-to-peer insurance company built completely on the Ethereum blockchain.

Blockchain insurance application: Dynamis is focused on unemployment insurance (or what they call "social capital"). Policy applicants need only provide their LinkedIn profile to verify current employment status. For those who are unemployed, the company’s blockchain will verify through profile connections and issue insurance payments.

Real-life use case: The company’s social capital insurance combines smart contracts and a peer’s social network to double-verify the employment status of a policy applicant. Still in its fledgling state, Dyanmis is looking to make their insurance more widely available in the coming months.


blockchain applications insurance lemonade


Location: New York, NY

What they do: Lemonade combines AI and Distributed Ledger Technology to offer insurance to renters and homeowners starting at $5 and $25 a monthly, respectively.

Blockchain insurance application: At Lemonade, blockchain comes into play through smart contracts. The company’s business model takes a fixed fee from each monthly payment and allocates the rest towards future claims. If a claim is made, the blockchain’s smart contracts will immediately attempt to verify the loss so a customer can get paid quickly.   

Real-life use case: If a claim is approved, Lemonade’s AI and blockchain combination will pay you in three seconds. (Lemonade was voted #1 of 270 companies for customer satisfaction in renter’s insurance.)




Location: Paris, France

What they do: Fizzy, a flight delay insurance tool, is a subsidiary of global insurance giant AXA.

Blockchain insurance application: Fizzy uses blockchain to ensure that members whose flights are delayed more than two hours are immediately compensated. The company’s blockchain supplements travel insurance that usually doesn’t cover financial loss due to flight delays.

The tool uses smart contracts to lock in terms for payments and policy information. Users have only to enter their flight details, personalize their coverage and make a payment. Fizzy will then use blockchain to immutably verify flight delay data and compensate customers.

Real-life use case: By December 2018, Fizzy’s instant blockchain-based flight delay payments will cover 80% of all worldwide flights.


blockchain applications insurance teambrella


Location: Saint Petersburg, Russia

What they do: Teambrella is an insurance platform whereby your team, rather than a centralized insurance company, co-insures your claims.

For instance, a Teambrella member in the U.S. can tell the team his or her dog needs emergency surgery. The rest of the team will vote on whether to pay for the pup's operation and how much of the cost they should cover.

Blockchain insurance application: Teambrella uses blockchain and smart contracts to execute insurance payments. Members of a certain Teambrella group are locked into a smart contract and use these contracts to transparently vote and execute payment for each claim.

Real-life use case: The company now has four insurance pilot groups that deal with bicycle damage and pets in Peru, The Netherlands, Argentina and Germany. They are in the process of expanding their operations to pet insurance in the U.S. and car insurance in Russia.

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Zim Buddy Team

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