Opportunities and challenges in implementing blockchain and smart contracts in the Finnish insurance industry

Abstract

Due to the market pressures and issues regarding insurance processes, traditional insurance companies must undergo a business transformation. The adoption of emerging technologies is seen as a crucial lever for achieving success in this business transformation. Among these technologies, prior research has considered blockchain and smart contracts as groundbreaking innovations capable of facilitating the business transformation. However, the academic literature is still limited and predominantly focused on the technological aspects. Additionally, insurance industry remains underrepresented in the existing blockchain literature. Hence, this thesis adopts a qualitative approach by conducting semi-structured interviews to gain understanding of the opportunities and challenges in implementing blockchain and smart contracts in the insurance industry. This research identified several benefits for the insurance industry stemming from theimplementation of blockchain technology and smart contracts. Among benefits include automation of claim submission and processing, improved fraud prevention and risk assessment, data security, enhanced customer experience, and operational excellence. Furthermore, innovative products that will attract new customers and provide competitive advantage to the insurance company, can be built on blockchain and smart contract technology. Moreover, with the support of these tools, defining multinational insurance policies becomes quicker and cheaper. While blockchain technology holds significant potential benefits and is accompanied by high expectations, this study suggests that, in its present state, blockchain may not be the optimal technology for the insurance sector. This is primarily due to legislative constraints, but there are also several organizational, technical, network governance, and ownership issues that impede the implementation of blockchain and smart contracts.