- Blockchain technology can be accounted for as the best suiting advancement that can be utilized to implement the concept of parametric insurances.
- The monthly National Advisory Draft Report suggested the need to file an insurance or disaster assistance claim to acquire a blockchain registry with critical information.
- Skyline Partners a startup utilizes weather catastrophes to automate the claims process to make the premiums economical to Indian tea plantations.
The concept of parametric insurance is applied to events like natural catastrophes whereby an index or scale replaces actual loss sustained. These Insurance payouts are automatically activated upon the happening of an event exceeding the parametric level.
Payment of insurance by insurers during the event of an earthquake reaching its catastrophic levels can be an example of the same. Blockchain technology can be accounted for as the best suiting advancement that can be utilized to implement the concept of parametric insurances.
This technology projects its role in platforms like Smart Contracts. Blockchain technology can increase the efficiency of the payment process through secured transactions and dependable data sources.
U.S. Federal Emergency Management Agency (FEMA) recommended the use of blockchain to accelerate insurance payouts in the event of a disaster in its report. This insurance is associated with the concept of ‘parametric insurances’ as discussed above.
The recommendation is based on the efficiency of ‘Smart Contracts’, whose functioning depends upon Blockchain networks, which can activate payments automatically during the event of a disaster.
The report necessitated the use of blockchains by quoting the incapability of citizens to preserve their insurance documents during disasters like Hurricanes which took place in Puerto Rico or Harvey in Texas.
Another significant advantage of Blockchains is its capability to reduce complications.
If there are multiple copies of records, when a disaster wipes out one set of storage, other nodes on the network can be employed to bring back the lost documents. However the same can not be applied when only the participants keep the copies.
The monthly National Advisory Draft Report suggested the need to file an insurance or disaster assistance claim to acquire a blockchain registry with critical information. FEMA will team up with insurers to make the event a federal disaster declaration.
The advisory board opined that FEMA will have access to Government departments at times of disasters with a pilot for its blockchain registry. This, in turn, will increase the productivity of the system by accelerating the feedback time with reduced risk and fraud.
Though the report is yet to implemented, insurance companies, in small numbers, have started to abide by the recommendations in several instances. However, a government registry is required to enable the regulator to monitor these. activities.
This will also help the government to hold insurance companies liable, instead of shelling money from its own treasury for disaster relief. Meanwhile, this system holds the insurance company directly liable for disaster reliefs reducing the burden on the Government. Other merits of Blockchain networks include geo-referencing properties through sophisticated technologies.
Some examples of this system include the blockchain microinsurance initiative of Sri Lanka’s Aon, Oxfam and Etherisc, established for rice farmers. Skyline Partners a startup utilizes weather catastrophes to automate the claims process to make the premiums economical to Indian tea plantations.
Vitana, Metlife’s Blockchain Parametric Solution to automate the payment procedure in pregnancy complications, can also be quoted as a suitable example that emphasizes the importance of such a system.