The future of travel insurance may be blockchain technology

Despite being a natural use for blockchain technology, travel insurance solutions delivered via blockchain are probably still a few years away in the United States due to the industry’s strict regulations, according to experts. travel insurance blockchain

Blockchain “definitely will have a place in travel insurance,” said Ryan Brubaker, chief information officer and executive vice president of operations at travel insurance company Seven Corners. “As far as the capabilities, there’s really numerous areas where blockchain will change the insurance business and the travel insurance business.”

When most people hear “blockchain,” they think about cryptocurrencies like Bitcoin or Ethereum. And while blockchain is the underlying technology behind cryptocurrency, it is its own technology with many other uses.

At its core, blockchain is an immutable ledger that records transactions and tracks assets, some tangible like cash and some intangible like patents or copyrights. The ledger is replicated, shared and synchronized, giving all parties access to the same data at the same time, making it a cost-effective way to track assets because it eliminates intermediaries.

For example, the technology could recognize a flight delay and automatically send out a payout, with no human verification necessary, TravelWeekly reports.

FlightDelay  travel insurance blockchain

Early this year, German blockchain startup Etherisc launched FlightDelay, an insurance product that uses blockchain to automatically issue policies and execute payouts for flight delays and cancellations on some 80 airlines. Policies can only be purchased, and claims paid out, with cryptocurrency. It is funded via an insurance risk pool supported by investors.

Christoph Mussenbrock, a mathematician, physicist and co-founder of Etherisc, said flight delays were a natural place to offer a blockchain-based insurance product because data on delays and cancellations is readily available, enabling automatic payments. It also enables Etherisc to avoid higher claims-processing costs and achieve savings on data protection costs because blockchain itself is so secure.

travel insurance blockchain

“I think it shows the disruptive power of decentralized insurance — that we can build insurance products at much lower costs than traditional insurance products,” Mussenbrock said.

Other insurers have taken note. Brubaker called Etherisc’s FlightDelay “a really cool concept, and I love that he’s doing that.”

Roadblocks to blockchain adoption

Regulations in the U.S., including the need for state-by-state approval, mean blockchain’s appearance in the U.S. insurance industry is about 10 to 15 years out, Brubaker said.

He said he thinks paying for policies with cryptocurrency will come first, followed by blockchain-backed identification cards that cut out an intermediary confirming the bearer is insured.

However, the type of insurance FlightDelay offers is already available in the U.S. through some insurers, albeit without the blockchain component.

It’s called “parametric insurance,” meaning that “some parameter is violated, and it’s an auto payout, so you effectively don’t need a claims adjuster to review anything or look at a receipt or anything like that,” Brubaker said.

Allianz, for instance, launched SmartBenefits, a proactive payment system for flight and baggage delays, in 2018. Earlier this year, the insurer said that more than 2 million customers had been covered by SmartBenefits.

But using blockchain technology to offer parametric insurance could save money and, in turn, enable insurers to pass some of that savings on to consumers.

“I think it’s a great use case, because what you’re doing is tracking a transaction and then compensating them immediately,” said Norm Rose, Phocuswright’s senior technology and corporate market analyst.

“Flight insurance is only as effective as the reward and the timeliness of the reward,” Rose said. “There’s a lot of frustration, let’s face it, especially after Covid, of the refund cycle, the change cycle. And on top of that, there’s a lot of disruption in the travel ecosystem right now … . So if you’re going to take insurance, and then have the settlement be done by a shared ledger that then triggers a payment more instantly, that’s going to make the traveler happy.”

That’s what Brubaker said he believes blockchain will bring to the travel insurance industry when it arrives in the U.S.: “Reduced-cost efficiency and then just happier customers.”

Chain4Travel blockchain use

Technology startupChain4Travelhas successfully closed a seed financing of 4.3 million Swiss francs. The freshly raised capital ensures rapid growth for the company as well as the launch of its blockchain and first applications later this year.

Chain4Travel is pursuing an innovative concept for the use of blockchain technology in the international travel industry: the goal is to build a blockchain-based ecosystem, providing a stable and secure platform for B2B and B2C leisure travel products. Tourism partners will be able to efficiently trade and purchase a variety of services on the platform, ranging from hotel rooms and rental cars to even a cup of coffee on a flight, using a set of simplified processes. In addition, travel partners can find all the information they need to effectively sell travel.

Ralf Usbeck, CEO of Chain4Travel, said: “We are launching Chain4Travel at the right time. Blockchain technology has the potential to revolutionize the global travel industry. We have the support of leading partners and experts in the international travel and technology business on our side to help us take off in full swing starting this year.” 

Thomas Stirnimann, COO of Chain4Travel, added: “The enormous potential of blockchain technology enables the travel industry to adopt new ways of thinking and visions in the distribution and marketing of travel products. The development will move very fast and rapidly change the processes we are used to.”


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