9. Insurance Under the Blockchain Paradigm

Although the origin of insurance is shrouded in obscurity, it is commonly assumed that the adoption of insurance can be dated back to around the second millennium BC in China and Babylon, where people developed a mechanism to pay their creditor an additional fund in exchange for the lenders’ guarantee to cancel their loan in case a shipment was lost at sea or robbed (Vaughan 1997). This original model has then gradually evolved into the modern forms of insurance that nowadaysare pervasive in our socio-economic systems. However, the multitrillion-dollar global insurance industry is still somehow stuck in the past. With significant amount of paperwork still existing in practice, data stored in information silos and manual processes not yet automatised, it seems that blockchain—by introducing cryptographically secured forms of shared recordkeeping—has the potential to innovate and radically change the insurance industry as we know it. This chapter will try to understand how insurance will change under the new blockchain paradigm.