Decentralised finance (DeFi) – which uses blockchain technology and smart contracts – has the potential to improve the efficiency and inclusivity of insurance. This is achieved by reducing transaction costs, automating and speeding up claims payments, and improving access to insurance via the provision of products and services on-blockchain.
Despite its promise, however, DeFi/blockchain insurance remains underdeveloped. Reasons for this include recent collapses in crypto markets, which have discouraged investment, insufficient maturity of the blockchain ecosystem, scalability issues, as well as various regulatory challenges.
This report takes stock of the current state of development of DeFi/blockchain applications in insurance and suggests steps that insurers can take to realise the benefits they offer.