The INSURTECH Book

The Smart Journey – From Contract Hype to Insurance Reality

By Akber Datoo

Partner, D2 Legal Technology LLP

Blockchain technology and “smart contracts” are often accused of hype. Yet multiple industries continue to search for the opportunities to unleash their inherent innovative and disruptive potential. Given the fundamental mechanics of insurance and the pervasive issues with contract management, one could argue that the industry truly needs the potential of the smart contract.

What is this Blockchain that Underpins the Concept of Smart Contracts?

Blockchain is a database, recording transactions, forming a “block” across a peer-to-peer network. Participants install the application locally and all the “nodes” hold a copy of the database, i.e. there is no central entity that holds control. The database is structured as a ledger of transactions into the blockchain, which is replicated in full by each participant’s computer, and therefore consists of blocks that hold “time-stamped” batches of valid entries. Each block includes the “hash” of the prior block, linking the blocks together. The linked blocks form a chain, with each additional block reinforcing those before it. Transactions are passed from user to user, or node to node, on a best-effort basis. If any data in any block in the chain is later altered, the hash of that block will no longer correspond to the later blocks’ hash of that “tampered” block, so the change will be clear to participants. The result is an indelible ...