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I am from the insurance industry, and I'm trying to understand if there's any value that blockchains and smart contracts can provide in this domain. I'm trying to understand things at the conceptual level, purely from an eagle's eye point of view, at the moment.

Let's take a simple example of automating life insurance underwriting and claims.

  • For underwriting, I can collect data from the person about their health if they agree to wear some kind of sensors, like a smartwatch for example, that can provide the insurer with - the insuree's data, based on which they can calculate how much premium should this person pay.

  • For claims, I guess somebody would need to make a public database where the insuree would need to register and, again, agree to wear a smartwatch that can monitor if the person is dead or alive. And hopefully, the database is updated real-time, or at least every few hours, so that the smart contract is triggered if the person dies and their insurance claim is disbursed to the nominee.

Where do Oracle networks come into this? I ask this because I've been doing some reading, and Chainlink always comes up in the articles as a way to do this. However, as I've described above, from my vantage point it seems like you only need a smart device and a database (that can be accessed in the form of an API or a website), from which the data can be fed to the smart contract. Or, is it that there's no simple way to feed this data into the smart contract, and that's what Oracles do? In other words, are Oracles simply an adapter for feeding real-world data into a blockchain?

Also, if I understand correctly, the whole point of oracles is that there should be multiple data sources and they should be decentralized, right? The correct data is then taken from some kind of consensus mechanism (like, majority vote, as the simplest example). So, in the above use case, how can there be multiple data sources, for both underwriting and claims, and how can be these be decentralized? Because the way I see it, there is only one data source - the smartwatch for underwriting, and the public death-records database for the claims. If so, then what are the advantages of using smart contracts to do this, as opposed to a "normal" system where the data from the smartwatch and the database are fed directly to a regular old if-else script written in Python, C, etc?

Not to mention the elephant in the room, that is if a person does not agree to wear a smartwatch, then what can be a reliable data source by which the person can be underwritten? And on a similar note, how can a real-time death-records database be even constructed?

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Firstly

I think its important to define what an oracle is first. As per Wikipedia, A blockchain oracle is a third-party service that provides smart contracts with information from the outside world. It is the layer that queries, verifies, and authenticates external data sources, usually via trusted APIs and then relays that information.

Think of it as a data/information aggregator that also performs the action of sending its data to the blockchain.

Secondly

What you have mentioned in your question :

"from my vantage point it seems like you only need a smart device and a database (that can be accessed in the form of an API or a website), from which the data can be fed to the smart contract."

NOTE: The Smart Contract won't access/call the data, it must be fed to the blockchain. But what you are explaining here by using the smart device, database and API PUSH methods - that in itself is an oracle. Chainlink is one of many, and of many use cases. You can easily set up your own oracle with its own use case.

It is completely possible to create your own oracle that sends data to a smart contract. The smart contract can have a specific function that when a certain data value or event occurs, an action is performed on chain.

Lastly

Your question regarding decentralization of your insurance data is really difficult to solve and quite specific. This isn't really a blockchain problem but an insurance claim problem. You should have check in place for that inside the organization.

The use case and advantages of using blockchain tech in this scenario will be the transparency of the ledger for both the clients and the company, fair policies that are set in code and an immutable data record.

I hope this helps :)

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