Blockchain-based Parametric Health Insurance

Abstract

In traditional indemnity policy insurance, the payment is made to the insurer based on the actual loss or the damage from an insured physical asset. Therefore, the settlement is typically a very long process as there are multiple parties involved. In comparison, parametric insurance insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event.We have seen that with digitization, the insurance industries have also been disrupted through the use of innovative insurance schemes, one of them being parametric insurance. In parametric insurance, a fixed amount is paid on an event once a certain threshold is crossed. The amount is determined based on the modeled forecast of the loss.Parametric insurance will help settle the claim process, which currently is challenged with a longer settlement duration and disputes. However, for parametric insurance to work, there is a need for the data providers to capture events and their trust factor. In the new data-driven age, technologies like IoT, API’s, and distributed ledgers are the technology enablers to capture real-time events and add a trust factor with the distributed ledger. Though parametric insurance can be implemented with the traditional centralized database approach, it has limitations on trust issues as the data can be manipulated.This paper explores how we can realize trusted digital technology-enabled parametric health insurance. It will deep dive into the technical solution, challenges to design, deploy, and parametric service insurance. A proof of concept was done for health-based parametric insurance, and the resultant blueprint, which can be applied for other use cases, is shared in sections ahead