![[artic 2018.194 - The Shipwreck.jpg]] Smart Contracts offer the insurance world -- both buyers and sellers -- the chance to 1. vastly cut costs 2. make the process of handling claims much more efficient 3. allow for new types of insurance to cover new types of risk 4. as a result of 1. and 3., offer insurance to billions who couldn't otherwise afford it See [[Benefits of Smart Contracts]] ## Applications Interest in smart contracts for insurance is coming from two directions: 1. Global insurance providers are exploring ways to use smart contracts to improve their existing processes 2. New startups, such as [[Arbol]] and [[Etherisc]] have launched smart contracts based insurance projects, notably in [[Crop Insurance]] ## Enterprise Adoption in the Insurance Industry [[State Farm-USAA Subrogation Project]] ## Parametric Insurance solves the Challenges of Calculating Losses in a Messy World Smart Contracts work best in applications where the parties can use objectively measurable, independently available data to calculate the payout according to an algorithm that can be precisely specified. [[Benefits of Smart Contracts#Smart Contracts Need Conditional Logic]] So, one of the challenges with using smart contracts for most insurance contracts is that most insurance contracts require the policy holder to show their losses -- and insurance companies have whole departments of "insurance adjusters" whose job is to assess claims and measure losses. This process inevitably involves subjectivity and human judgment. How to handle this subjectivity? Enter a (relatively) new type of insurance called [[Parametric Insurance]]. Parametric insurance and smart contracts are a great match, because Parametric Insurance is "essentially a distilled if-then statement"[^1] >As aerial imagery, sensors, connected devices and other technologies continue to become more sophisticated, they will create newer and more accurate streams of data ripe for analysis and application. **Any time you can meaningfully connect risk to a given data set, there’s an opportunity to employ parametric insurance**.[^1] Parametric Insurance is particularly well-suited to [[Crop Insurance]] # References [^1] [Rethinking the Limits of Parametric Insurance](https://www.insurancejournal.com/news/international/2019/09/24/540903.htm), Michael Eliot, Insurance Journal, 2019-09-24, available at https://www.insurancejournal.com/news/international/2019/09/24/540903.htm