Insurtech is exponentially changing the insurance industry, transforming customer experience and breaking with industry dogmas, for example in microinsurance (insurance for increasingly smaller customer segments). Some microinsurances are based on parametric triggers for quick payouts depending on measurable factors: for example, policies for farmers based on the damage a particular type of crop is likely to suffer under specific conditions, e.g. 100 mph winds; when those are met, the farmer receives compensation. Without inspectors evaluating damages, claims can be quickly settled, allowing claimants rapid access to funds to keep their business running.
Although microinsurance has been widely extended in developing countries, recently and due to economic crises, these products have gained popularity in developed countries (after the 2008 financial crisis and after COVID-19 pandemic). Consequently, it is now more necessary than ever to investigate technological solutions to provide citizens with agile mechanisms for contracting social protections such as microinsurance, favouring the revitalizaton of economic activity. Mobile apps allow to speed up contracting, reduce transaction costs and, in epidemic circumstances, help to maintain social distancing. However, it is necessary to guarantee that microinsurance is contracted securely.
For this, Distributed Ledger Technologies (DLTs), like blockchain, make it possible to record all transactions in an encrypted and distributed manner. Using DTLs, smart contracts can be built, and automatically executed when certain conditions are met. This information can be obtained from outside the blockchain using oracles, making smart contracts ideal for managing parametric microinsurances. As such, from Eurostar Mediagroup and the BISITE research group (University of Salamanca, Spain), we propose CARECHAIN project, to research in DLTs, including blockchain and Directed Acyclic Graphs (DAGs)/tangles, to build an environment for executing of smart contracts to manage parametric microinsurances. Smart contracts will exploit oracles to read external conditions, execute them and provide the corresponding coverage.
