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Instant insurance

Instant insurance via the blockchain will change the world. So why hasn’t it yet?

Harry Hamburg
Harry Hamburg
12 min read

I have something a little different for you this week.

Right now I’m away in Italy for my birthday.

But instead of skipping this week’s issue, I’m reposting something I wrote back in 2019 about how blockchain will disrupt the insurance industry, and make all our lives better in the process.

To be fair, that hasn’t happened yet… but I’ve just convinced myself it will do (eventually) while rereading and proofing this article.

So here we go. Step into my time machine…

I’ve just got back from two and a half weeks in Vietnam, which is why I’m writing to you a week later than usual.

On the way out there, something happened to my travel plans that has given me the theme for this month’s issue. It illustrates another major area of life and business that is set to be revolutionised by crypto.

I was hesitant about using the word “revolutionised” there because it is now so overused by so many non-revolutionary businesses and ideas. But in this case, as you’ll see, it really fits.

Here’s my story.

We were flying out to Hanoi via Bangkok from London Heathrow.

Everything was going fine. Then just as we were due to board, we were told there would be a short delay.

This delay, in the end, turned into a flight cancellation.

You see, this was the day Pakistan and India had declared no-fly zones and our flight was due to fly over Pakistan.

Other aircraft carriers simply rerouted their flights, but ours decided to ground every single one of its flights going to and from every single European destination.

As you can imagine, it was chaos.

Adding to this, our carrier was refusing to put passengers onto any alternative flights from other carriers.

Many passengers pointed out this is against Civil Aviation Authority regulations, but that didn’t seem to matter.

Our carrier instead shipped passengers off to a hotel at 2pm in the afternoon and said it would try work something out tomorrow. But it didn’t know what.

All the carrier’s airport staff then went home and its customer service lines closed down.

Basically it was overwhelmed by the situation and didn’t know what to do, so it ran away.

If you’re wondering who our carrier was, it was Thai Airways. And as you can imagine, I can’t recommend you ever fly with them.

Its bizarre decision to ground every flight going into or out from Europe made all the UK papers.

So we had a choice, take the coach to a hotel and stay there until the next day when we might be able to get a flight out.

Or cut our losses and buy new flights out with a different carrier there and then.

The thing is, those alternative flights were over £1,000, and we don’t have that kind of money to throw away.

And I should probably point out that we were flying to Vietnam to attend a wedding in about 48 hours’ time. So we didn’t really have much time to play with.

As a last ditch attempt, I called my credit card company. They apologised for our situation, immediately credited my card £1,000 and said they would launch a dispute with Thai Airways.

The alternative flights I’d found came to £1,040, so we were pretty happy with that.

We had still lost out on money because by this time we’d missed our next flight from Hanoi to Da Nang, but that was a much cheaper flight to rebuy.

Situations like this are what you buy travel insurance for, right?

Only the thing with travel insurance is it takes weeks and weeks, if not months to claim. And you have to fill out reems and reems of forms and supply pages and pages of evidence to support your claims.

I know this, because that’s what I did over the weekend.

Maybe you get some money back in the end, but at the time, that insurance isn’t doing you any good at all.

[2022 update… I never got anything. It turns out travel insurance doesn’t cover flights being cancelled because of sudden no-fly zones.]

But what if it was instant?

What if the second your flight was delayed or cancelled you got your pay out, without having to send in pages and pages of forms and evidence?

And what if this model didn’t just apply to travel insurance, but to all kinds of insurance, from home, to car to medical.

That would be pretty revolutionary, wouldn’t it?

Well that is what blockchain-based insurance promises. Actually not just promises, it has already been tested, proven and initiated.

Why insurance claims take forever

The reason insurance pay-outs aren’t instant is because insurers have to verify everything you’re saying is true.

Sticking with my flight delay insurance example, the insurer needs to verify:

  • You are who you say you are.
  • You have a policy with them.
  • Your policy covers flight delays/cancellations.
  • You had a ticket on the delayed/cancelled flight.
  • Your flight was actually delayed or cancelled.

What really slows this process down is insurers currently get all this information through printouts and letters.

In my case I had to print out many pages of forms, fill them out in pen. Print out pages and pages of supporting documents, bundle it all up and post it to my insurer.

Then at their end someone will have to go through all these printouts and forms, verify them and digitise them.

If there is missing information or anything needs more explanation I will receive their questions through the post and have to post back the further evidence they need, which will then be sorted, verified and digitised at their end.

And this process will repeat until everything is sorted.

What can crypto do to change this?

It can automate the whole process, make it instant and make it much more secure.

There is a company called etherisc that launched a fully regulated, blockchain-backed flight insurance proof of concept last year. Here’s how it worked:

You go on their site, fill out your name, email and flight details.

You then choose how much you want your premium to cost in GBP, EUR or USD. The higher your premium, the higher your pay-out will be if your flight is delayed/cancelled.

For example, if you chose a $28 premium, you would receive the following pay-outs:

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