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The blockchain technology has been developed based on the Bitcoin idea – the public model of crypto-currencies – as a public peer-to-peer network. 

The usage of crypto-currencies should be the first use case in the insurance industry, I believe. But it won’t be the last.


The nature of blockchain technologies – with distributed, decentralized transactions among unknown parties – is a complete new approach for the managers of insurance companies, similar to other financial institutes. As a first step, it will take some time and some experience to develop a solution, which can then be used to convince the insurance company’s management and the leaders to accept transactions with the relevant network partners.


The second step is the idea of a private blockchain to restrict interactions to a known group of participants. The case will be more of an evolution phase. Such an approach offers the potential for new business models, such as SMART contracts, which can be processed more quickly with less bureaucracy. The private blockchain is inspired by the blockchain approach, but it does not consider all of the aspects of the technology due to some restrictions. Nevertheless the private peer-to-peer network approach is gaining more supporters and is building a new foundation of business models.


Examples of blockchain scenarios:

  • Transport insurance combines the smart contract with event control and considers/tracks the specific risks like weather, damages of the road surface, crime rate and traffic jam.
  • Automated claims management process  with automatic pay-outs
  • Climate risk bonds with automatic pay-outs based on a climate data feed for crop insurances
  • A blockchain of insurers and reinsurer world generate more transparency of the relevant portfolio


This second step of the evolution will generate new approaches, new companies and new competitors.

Further steps will be cross- industry peer-to-peer networks and accordingly networks of insurers. The generation of such networks will require the trust in the technology and the business model to be taken for granted due to the wide adoption.


Challenges for insurers

  • Insurers have to analyze which use cases are relevant for their business
  • Analysis of the blockchain startups and a possible decision about a collaboration model versus competitor
  • The peer-to-peer technology allows new insurance models, which could increase the competition with non-insurance players


Step one and step two are also considered the incubators of the following waves, but they are more than that since they are fundamental components of a blockchain strategy which the insurance companies have to integrate in their IT-architecture and their business strategy.


If you are interested in more details or a discussion about blockchain in insurance, please contact Stefan Schmidt stefan.schmidt@sap.com. You will find more information about the SAP portfolio for insurers on our website SAP for Insurance .

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