The Role of Smart Contracts.

We’ve shared our thoughts on the opportunity for Open Insurance in the life and annuities industry, as well as introduced foundational technology such as our Zahara(™) System of Record. Another important enabler of Zinnia Open Insurance will be the smart contract.

A smart contract is essentially a decentralized, self-executing digital contract where the agreed upon terms are written into the code. When a prescribed event (or set of events) occurs as specified, the smart contract automatically—and independently—executes against the terms of the agreement. Smart contract execution can result in the exchange of money, delivery of services, and change in beneficiary or ownership, among many other use cases.

Smart contracts are underpinned by a variety of different architectures, and while the technological foundations are extremely important, this post is focused on what you can do with smart contracts and why it’s a better approach for the industry, not how you enable them.

Life insurance policies and annuities are contracts between a carrier and the policyholder for a specific set of risks. Today, any event related to an in-force policy is typically administered manually to some degree. Information and resulting changes from the triggering event, such as a claims payment, are often recorded in multiple systems. As a result, there are many points of friction and failure that can result in delays, higher administrative costs, and increase the potential for fraud.

For these reasons, the industry has been automating and digitizing aspects of policy management (and other processes) for several decades to great effect. As a leading TPA, SE2—and by extension, Zinnia—helps carriers and fund partners update, automate, and manage these back-office operations. We know first-hand what these challenges mean for our clients, and we’ve been applying the latest technologies to improve operations for many years.

Zinnia Open Insurance is “what’s next” for the business of insurance. We have brought together our insurance industry expertise with the vision of innovators from technology and data science to help our clients achieve even greater efficiencies and deliver exceptional outcomes.

Smart Contracts in Life and Annuities

There are several advantages to the smart contracts approach to life and annuities, including:

Transparency and traceability: Smart contract data is stored in a distributed ledger that can’t be altered, that is time-stamped, and therefore auditable.

Autonomy and security: Smart contracts include explicit data permissions and the ability to provision data in real time to ensure that only authorized parties have access to the data they are authorized to access.

Cost efficiencies: Smart contracts can automate business processes internally and across organizational boundaries.

Speed of execution: Smart contracts only execute when predefined triggers occur, and once triggered, automatically execute across multiple organizations (or internally, as predetermined)

The Claims Processing Example

When a policyholder files a claim, an investigator reviews the details and determines the amount covered by your insurance policy. This involves verifying that you have a right to claim and that the policy is in good order. These are processes that can be written into the smart contract.

The claim “trigger” automatically verifies policy ownership, status, and must meet additional predefined criteria to move to the next step. Likewise, the rules that determine coverage can be written into the contract so there are no questions to be verified about what is and is not covered. Authorized parties involved in the claim—carrier, claimant, reinsurer, broker—each have appropriate access to claim information in real-time. And assuming all the conditions are met, the claim is automatically paid.

Just the Beginning

There are so many more benefits to smart contracts than can reasonably be explained in a single blog post, so stay tuned for additional posts describing additional benefits (such as accelerating new product launches and facilitating dynamic risk transfer of assets). We’ll also post more about the enabling technologies that will make smart contracts (and Zinnia Open Insurance) possible.

Meanwhile, we’re happy to discuss how smart contracts can improve your business and answer any questions you have, please reach out to: