Considerations about the future social implications of decentralized technology often present newly differentiated images of superior methodologies in some way that may be radically different from current ones. However, the decentralized record of centrally controlled operations could instead be a marked downgrade to both the potential and promise of technology development. Without an equivalent precedent structural change, the introduction of decentralized technologies in established industries that wish to strengthen rather than improve service offerings should be of great concern to all of us.
In a well-known fact-based business school anecdote, the case for an early life insurance claim is often repeated. Shortly after this type of policy became available, the holder of a life insurance policy passed away during the term of their high payment protection. When the family of the deceased tried to claim, the insurer wrote a new definition of how their company calculated ‘one year’ for [successfully] avoid settlement.
Talk of commendable industrial ingenuity or helpless profit would most likely depend on whether it was broadcast at a strategy or ethics conference. However, with this story in mind, we now turn to the introduction of blockchain technologies within the insurance industries:
“ORLANDO, Florida – Blockchain technology has a future in workers’ compensation transactions, as the technology has the potential to improve communication and efficiency across the industry,” a presenter told attendees at the Annual Labor Issues Symposium. National Board of Compensation Insurance Inc. on Friday. a decentralized peer-to-peer network that provides insurers and stakeholders a way to “produce, store, manage and share data as a secure record of transactions,” said Paul Meeusen, head of distributed ledger technology and director of reinsurance Finance at Swiss Re and CEO of B3i.
Blockchain consists of a distributed, consensus ledger that provides a “single version” of information, cryptography for safe and authentic transactions, and smart contracts, which are automatically executed under predefined conditions, Meeusen said. In a traditional insurance system, there is an inefficient flow of information from the insured to the insurer, to the reinsurer and to the capital market, he said. Mr. Meeusen explained how the technology works to create efficiencies instead of collecting and examining data in separate systems.
“We work together, but we remain in control of our data,” he said.
For workers’ compensation, blockchain can provide interested parties with opportunities to share personal and medical information, providing a secure place to store and access data. The technology would also allow verification of compensation coverage across the entire blockchain platform, he said. Blockchain also enables real-time messaging and confidential information sharing across the industry, he added. “There is definitely an efficiency component here,” said Mr. Meeusen. “May 19, 2018, Louise Esola on Business Insurance
In fact, the blockchain can offer a transparent, decentralized and immutable record of digital data entries. There are also numerous possible extensions that use automatically executable or complex triggered ‘smart contract’ events. This is indisputable. However, the quality of the content is perhaps something that is often overlooked or simply subsumed in the excitement of technology.
Reproducing existing methodologies through new media may mean forgoing opportunities for improvement. In other words, regardless of whether an insurance policy is centrally held by the issuing company or registered through decentralized technologies, this says nothing about its practical implementation. The same issuing company formulated and enforces the terms.
The caveats, clauses, loopholes and conditions of many insurance policies that prohibit payments to holders are too numerous to list here in detail. Suffice it to say that for many they are a recognizable part of the insurance process. To now immutably digitize the terms and conditions of the insurance company with complexities that may not be understood by the individual holders of such policies, it only confers benefits on the issuing company.
Instead of an affable exchange, clarification, or justification in any misunderstanding here, the holder’s digitally immutable and time-stamped agreement with said document is locked forever. While the transparency of the documents themselves may be established, understanding and respect for the policy remains largely one-sided. The use of immutable records is only beneficial if there is sufficient knowledge of the meaning or implications of these records. A complicated and one-sided policy is still just that, whether on or off the blockchain.
The mere presence and survival of the hugely profitable insurance giants should be an indication of the business structure. Ultimately, as in a casino, the company’s calculations and metrics are superior to our understanding of probability.
Similar to a round at the blackjack table, a player’s chance of making a profit or his enjoyment of the stake risk itself outweighs what is essentially a guaranteed loss when measured on a sufficient time scale. The house always wins. That is why there is [well decorated and ornately furnished] house itself. Apart from investment strategies, as well as a multiplicity of financial activities, at its core there is insurance coverage as the house is betting that we, the policyholders, are wrong.
For any business, it is unsustainable to pay more than you receive. Therefore, the variety in the choice of insurance has been available and continues to be available, since the purchase of these, for a sufficiently long period of time, makes the issuing company earn more than it costs them when paying. .
This does not mean marginalizing a number of potential benefits, protections, and security that insurance offerings provide. As with car accidents, for example, in a cost-benefit analysis, one’s deference to seasoned centralized giants for resolution may be simply prudent and is worth such costs, particularly in consideration of potential requirements for alternative time. It is simply to say that in all insurance offers, the house [an insurance company] it exists because it is still profitable.
When blockchain technologies are intended to be a panacea for the development and future of the industry, perhaps we should all take a step back and wonder if we really understand the policies themselves before we get too excited about their immutable record.