Blockchain has the potential to reshape travel insurance

New mode of insurance to streamline the insurance process, allowing automated and instant payouts

Blockchain has the potential to reshape travel insurance

Insurance News

By Gabriel Olano

On Thursday, a glitch with Amadeus Altea, a passenger management system used by 125 airlines all over the world caused numerous flight delays across various countries, such as Australia, Singapore, France, and the United States, just to name a few.

These flight delays are extremely frustrating for everyone involved, and the arduous process some travel insurers put their policyholders through just to make a claim makes it even more infuriating.

However, an emerging type of insurance can make it easier for customers to make claims in case of flight delays and receive compensation quickly. Parametric insurance uses data and algorithms, which automates most steps of the insurance process, such as underwriting, claims, and payouts, in response to an event, such as a flight delay.

Aside from travel insurance, parametric technology also has uses in agricultural or catastrophe insurance, using official weather data to determine payouts. Several major insurers, such as AXA and Swiss Re, have launched parametric insurance products, including travel insurance that compensates for flight delay.

One of the technologies that make parametric insurance possible is Blockchain, which is a form of distributed ledger that synchronises data across several sites. The technology’s proponents claim that it is secure, decentralised, and tamper-proof. This allows travel insurers to make fully automated payouts for passengers affected by flight delays.

“That is welcome news for customers,” Stephan Karpischek, a co-founder of Etherisc, an insurance technology firm dealing with Blockchain, told the International Business Times.

“Blockchain’s transparency and automation can provide the means to disintermediate the market with a peer-to-peer risk platform that helps insurance return to its roots as society’s safety net.”

Etherisc has developed a decentralized application of parametric insurance for flight delays. It was unveiled last year in a major developers’ conference in Shanghai.

Karpischek added that Blockchain also is of benefit to insurers, as it cuts down on red tape and streamlines the business process. It eliminates the need for damage assessment and greatly reduces opportunities for insurance fraud. It also makes the process more transparent, as policyholders already know the amount they will receive in case of an event, such as a flight delay, which helps prevent disputes over payout amounts.

Related stories:
Insurance giants on the same side as blockchain prototype debuts
Maersk, MS Amlin, XL Catlin to incorporate blockchain into marine insurance
Peer to peer insurance: traditional insurers need to wake up

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