New technologies are revolutionizing many sectors, including the world of insurance. Insurtech is the term used to refer to the companies or projects that bring technologies such as Big Data, Blockchain or Artificial Intelligence to insurance companies in order to transform customer experience and break the dogmas of the sector.
In this regard, the BISITE Research Group of University of Salamanca ventures into this sector together with Eurostar Mediagroup and the CARECHAIN project, which is to investigate DLT, including blockchain and directed acyclic graphs (DAG)/tangles. The aim is to build an environment for the execution of smart contracts to manage parametric microinsurance. Smart contracts will leverage oracles to read external conditions, execute them, and provide corresponding coverage.
Although microinsurance has become widespread in developing countries, these products have recently gained popularity in developed countries. Mobile applications make it possible to streamline contracting, reducing transaction costs and, in epidemic circumstances, helping maintain distance. However, there is a need to ensure secure microinsurance trading. Distributed Ledger Technologies (DLT), e.g. blockchain, make it possible to record transactions in an encrypted and distributed manner.
How does CARECHAIN act in microinsurance underwriting?
CARECHAIN will provide a transparent open API service for trusted online microinsurance contracting through Smart Contracts and oracles, an entry point for ONTOCHAIN in Fintech / Insurtech, the most trust-demanding sectors for online transactions, and will have a major impact on the EU insurance industry, enabling future innovations in line with the NGI initiative.
To take out microinsurance, a user logs on to CARECHAIN, selects a suitable one, including the conditions that trigger it, which creates a smart contract. When the conditions are met and read by oracles, the SC is executed, automatically sending a compensation. Transactions are auditable and immutable.
CARECHAIN's core functionalities include a Smart Contract execution environment for the contracting, management and execution of parametric microinsurance, and oracles for the verification of parameters/conditions. An open API will be provided, which will allow other projects in ONTOCHAIN to access CARECHAIN services.
The CARECHAIN project is part of the European initiative ONTOCHAIN , which seeks to support academies and high-tech companies in the conceptualization, development, experimentation and integration of new Blockchain and Distributed Ledger technologies that aim to preserve the integrity and reliability of information and content.Here is an interview with our colleague and project leader, Javier Prieto from the ONTOCHAIN team. "This idea starts with a particular use case, the creation of parametric microinsurance for agriculture and livestock. I would like to highlight that with this use case clauses are easily automated with current technology and that in times of social distancing it was a means of obtaining better results in less time and that it was easily adaptable to a distributed ledger ecosystem without human intervention. With Carechain we seek to completely rethink the initial idea, and make it more scalable by parametrically creating Smart Contracts for microinsurance clauses." (link to the interview).