Web3 and Insurance

There is no better time to talk about crypto or Web3 than during the downturn or bear market. During a bull market, 90% of crypto which is scams come out of slumber and normal reasonable folks seem to view the entire crypto space as one big scam.

These are just some of my thoughts on what I would think are areas the insurance industry can leverage web3 for.

Let's not even talk about crypto or coins or technology. Cause that is noise when you are trying to solve a real-world problem, the latest and fanciest technology is just song and dance and nothing else. Let's legitimately focus on the problem we have to solve.

The insurance industry is a big behemoth covering from personal lines to health to what not, so let's focus on personal lines for the sake of limiting the words here. What we are going to talk about here can be extrapolated and applied to most of the insurance industry.

A traditional established insurance company would like the status quo, they have their contracts, kickbacks, relations in-tact, and think traditionally. So let's use the lens of an Insurance startup to solve the pain points.

For selling personal lines in auto, typically the companies rely on 3rd party aggregators to gather information on the insured entities; say here vehicles and persons. 

All of the historic vehicle information based on VIN 

All personal credit\driving history based on personal details

Now for a new company, they would have to rely on contracts with all of these companies to make sure they have enough data on the customer which they can pull, and do a good risk analysis to provide insurance.

The actual data is owned by the customers but handled by middlemen who literally charge to hold and provide when needed to companies.

Can these middlemen be replaced instead by a blockchain? Can it be used for a system of record for such information as this is not

a. specific to insurance company

b. belongs to the customer

Limiting the use

Blockchains are slow and expensive(compared to centralized datastore with api on it). So what info can reasonably be on it and benefit from it.

Should the basic quote information or any such be on the blockchain which is too expensive and definitely won't bring in any advantage to having it there on it? Definitely not.

The strongest reason for blockchain is the data is immutable and anyone with the right authorization can access it.

Let's make some rules on what kind of data can be on the blockchain.

1. Data that doesn't change and is on record for life

2. Data sensitive enough to be behind a paywall\access restriction, but not sensitive enough to be used against the owner (like SSN etc)

What are some of the examples of such data?

Vehicles - VIN, Accident History

Drivers - Driving History

What is the role of insurance companies here

- Provide to be custodian to customer info by holding the keys

- Permit to use that info for any profit sharing etc when other companies request it


I will strongly advocate not leveraging blockchain to create the insurance product itself. Like using oracles, DeFi, and all, they might sound good and find use cases, but they are really not that fast, nor cost-effective, or any other reason to use it than to sound good with the trend. There are clearly other implementations and areas to be explored than what I just mentioned above.

So my suggestion for someone who is building a new insurance company ground up, do what you do the best, but be the incubator to have your customer's own information on a blockchain and offer to be a custodian for it. You should look for it to expand where other companies are willing to offer to share similar information on it and offer to be custodians for that too. And the customer should be able to choose his custodian or as such and benefit from it.

Now, on the question of which blockchain to use? There are many good ones out there to choose from. If you talk to a Bitcoin Maximalist they think everything can be on bitcoin or if you talk to an altcoin person, they think it's the next big thing. There are many good-intentioned reasonable public blockchains out there to choose from. But it's a discussion by itself to go over pros and cons of each and choose one.

Then there are cases for creating a federated blockchain which many consortiums did, but if you cut the noise they are just replicated databases with central authority on commit with no real distributed consciousness mechanism.