Could Blockchain lead to cheaper car insurance?

Posted on: October 11, 2017 by Julien Jimenez

Initially set up in 2008 to support digital payments in Bitcoin, blockchain technology has become notorious within the financial services industry. Whilst the technology has grown, the benefits outside of payments have remained under the radar. But blockchain technology is growing and is starting to be developed for other uses, so much so that the global market size will be worth $2.3 billion by 2021. Here, I explore how blockchain can be used in the automotive industry to prevent fraud, build trust and lower car insurance premiums through customized policies.

The driving force behind the automotive industry

Blockchain works by enabling a group of users with a common goal to create an authenticated tracking system of transactions or events. It is self-managed, secured, accountable (through the use of a ledger) and works with a set of rules and a calculation process.

The accountability of the technology can enable trust in the automotive industry. This is something that has been damaged in recent years due to customers receiving invoices for unnecessary services, costs exceeding the estimate without prior agreement or repairs being invoiced but not carried out. But, implementing blockchain could offer safe and forgery-proof car maintenance books. This would enable a climate of trust to be re-established, and improve relations between the various stakeholders within the automotive sector.

Digital log books already exist but with a third party that has full control of the data. Using blockchain would enable all the operations that were carried out on a vehicle to be tracked. Once they have been recorded, all modifications could be prevented, either by the garage or by the owners themselves. Blockchain offers more possibilities as it fosters the development of new value-added services and brings opportunities for car dealerships to enhance customer relationships and brand intimacy.

Advantages for car maintenance and customers

Car maintenance involves various participants with prior certification, such as the manufacturer, spare part vendors, independent garages, repair centers and the customer. In the blockchain, each record would generate an operational cost. The shared infrastructure and the associated costs however, could be automatically redistributed among participants.

Aside from transparency and the redistribution of costs, the blockchain allows the consumer to take control of their own data. This means that it is not only secure, but may also provide an opportunity for consumers to give access to parts of their data to an insurance company for a customized quote.

This data can be used to prevent fraud, particularly during the reselling of second hand cars. Under-estimating the vehicle mileage or ‘forgetting’ to declare a serious accident will be prevented by the recording of maintenance operations in a blockchain. Any modifications will be stored and this guarantees the vehicle’s history. It provides a form of insurance for the buyer, to have information certified by all the people who have worked on the vehicle and it is also a guarantee for the seller that they can resell their vehicle at a fair price.

The future for blockchain in the automotive industry

But how can blockchain lead to cheaper car insurance? As the technology stores all the driver’s data, as well as the car’s modifications and details, this could eventually enable several users to share the same car. Blockchain registers the number of times each person drives the car and for how long, and so historical car user data could provide in-depth analysis of car modifications as well as a driver’s conduct and driving style. This will make it possible to customize insurance premiums on a “pay-as-you-drive” basis.

The entire sector would benefit from improved customer relations and a significantly more professional image, as blockchain reduces fraud, increases transparency and trust. In-depth driver analysis, would encourage the potential for cheaper customized car insurance as drivers take advantage of this transparency. Despite being beneficial to all parties in the automotive industry, scepticism outside of the financial services industry remains. Like with many ground-breaking technologies, early scrutiny and doubts are to be expected, but given time, drivers may question how they ever survived without it.

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About Julien Jimenez
Research & Development Engineer
Julien is a Research & Development Engineer and part of the experts network within Worldline. Graduated from a generalist engineering school in 2008, Julien has 10 years of experience in the field of security and trust. He is particularly focused on new technologies for payment as thin client POS, secure element and mobile payment. His area of particular interest is bitcoin and its underlying technology: blockchain.