AXA adopts blockchain technology for insurance product
French insurance company Axa is testing Fizzy, a platform for flight-delay insurance relying on smart contracts, powered by the ethereum blockchain. The platform, which automatically triggers a payment if a delay of more than two hours is registered on the ledger, is aimed at streamlining the claims process and increasing transparency and trust between clients and insurers. Compensation will be paid in fiat currencies, though Axa plans to issue ether payments in the future. The company did not indicate a date for the full launch of the platform. 

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French insurance giant AXA has rolled out a new flight-delay insurance product, Fizzy, which will store and process payouts via "smart contracts" — self-executing contracts triggered automatically once pre-determined parameters are met in the real world — based on Ethereum's public blockchain.

For now, payouts will be issued in fiat currencies, though AXA aims to use Ether eventually. Fizzy is currently in a testing phase, and AXA hasn't yet specified a date for a full launch.

AXA says using smart contracts stands to deliver two major benefits:

Streamlining the compensation process for both providers and claimants. When an AXA customer buys flight-delay insurance on the Fizzy platform, the purchase is automatically recorded on an Ethereum-based immutable ledger, and a smart contract is created on the blockchain. The smart contract is linked to global air traffic databases, which means that as soon as a delay of over two hours is registered on the ledger, compensation is automatically triggered. Moreover, the customer is told how much they will receive when they first buy the coverage.

When an AXA customer buys flight-delay insurance on the Fizzy platform, the purchase is automatically recorded on an Ethereum-based immutable ledger, and a smart contract is created on the blockchain. The smart contract is linked to global air traffic databases, which means that as soon as a delay of over two hours is registered on the ledger, compensation is automatically triggered. Moreover, the customer is told how much they will receive when they first buy the coverage. Improving the insurer-customer relationship. This process means the need for a customer to file a claim is removed, and the compensation decision is delegated entirely to an automated arbitrator — the smart contract — which eliminates potential disputes between insurer and client. In turn, the company says, this brings greater transparency to the claims processing procedure, which should build up trust between customers and their insurance providers, whose interests are often seen as being at odds.

Smart contracts promise particularly large benefits for insurers, but legal dilemmas are likely to stand in the way of widespread use for some time. The insurance industry is particularly well positioned to benefit from implementing the technology, as it promises to reduce friction between the many disparate parties typically involved in an insurance payout, thereby reducing costs and conflicts between carriers and end customers. As such, incumbents will likely be keeping a close watch on how well Fizzy does in its test phase. However, even if the solution does well, we might not see smart contracts take off for some time: This is because, beyond the success of individual solutions like Fizzy, unresolved questions remain about the enforceability and legality of smart contracts, which might take a longer time to solve than technical hurdles.

The global insurance industry is worth nearly $5 trillion, and insurance companies are at risk of losing a share of this valuable market to new entrants. That's because these legacy players have been even slower to modernize than their counterparts in other financial services industries.

This has created an opportunity for a group of firms known as insurtechs. These startups are leveraging new technology and a better understanding of consumer expectations to increase efficiencies in the insurance industry. Some are helping incumbents deliver better end products, while others are directly competing with legacy players.

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Explains the structure and current state of the insurance market.

Highlights areas where insurtechs can help legacy players modernize.

Describes where insurtechs are competing with incumbents and how their models compare.

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