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Blockchain Technology and Life Insurance

Blockchain Technology and Life Insurance
Written by publisher team

What you need to know

  • Life insurance companies can start using cryptocurrencies as an alternative to gold.
  • Some clients will see both cryptocurrency and life as a partial reserve escape.
  • Rising inflation may spur insurers and consumers alike to try more alternatives to the dollar.

In the rapidly emerging crypto and blockchain technology environment, searches like “Bitcoin and Life Insurance” produce a wide range of content and topics.

Concerns range from the possibility of life insurance companies moving toward accepting Bitcoin, to engaging major life insurance companies in buying large amounts of Bitcoin, to increasing investments in life insurance in efforts to prepare to offer a Bitcoin (or other cryptocurrency) investment, all of which are considerations Major and central to the life insurance industry.

At the same time, “Decentralized Finance” (DeFi) – a key component of the Bitcoin and cryptocurrency infrastructure – is not only changing the finance game, it appears to be challenging the foundations of the existing financial system. Regulators are now scrambling to address potential concerns and major crypto companies are responding similarly to educate regulators.

As the life insurance industry becomes more familiar with Bitcoin, crypto in general, and DeFi, the involvement and influence on the life insurance industry is still in its infancy.

In this case, this article will attempt to provide an overview of the current state of affairs regarding the impact of Bitcoin and blockchain on the life insurance industry so far.

Then we’ll look at DeFi, first by reviewing what constitutes modern financial infrastructure and the inherent fears of devaluation, inflation, and central control.

Next, we’ll take a more in-depth look at what DeFi really is and how it can dramatically impact the current financial system in the United States and beyond.

Finally, we’ll look at the horizon of bitcoin, crypto, and DeFi, as they may provide new opportunities for life insurance companies in the space.

Bitcoin

MassMutual, the largest lifetime joint venture company, is particularly interested in bitcoin. In December 2020, MassMutual purchased 100 million bitcoins for a public investment account And It has acquired a stake in NYDIG, a leading provider of technology and investment solutions, for a Bitcoin fund.

The deal between MassMutual and NYDIG over Bitcoin was built on what MassMutual sees as increased cryptocurrency involvement in the financial landscape and demand from financial professionals and their clients for bitcoin.

“MassMutual continues to innovate and lead the pack when it comes to bitcoin,” said Robert Guttman, co-founder and CEO of NYDIG.

Blockchain

Other life insurers are beginning to use blockchain technology, a cryptographically secured form of shared record keeping, to prevent insurance fraud and track records, file claims, and more.

For example, MetLife appears to be using the Ethereum blockchain technology to add transparency and efficiency to the life insurance claims process.

Related Questions

There are many other different questions related to bitcoin and crypto and the impact on life insurance companies, such as when will different life insurance companies start accepting bitcoin (or other cryptocurrencies) as payment or Crypto holdings insurance companies.

There are also related questions such as getting insurance to encryption. For example, Lloyd’s of London has an insurance policy that protects cryptocurrencies in online wallets. Finally, there are many estate planning considerations such as taxes, identification of crypto assets and their passing on to future generations.

decentralized finance

DeFi is a rapidly emerging ecosystem that allows all types of financial products, from coins to digital art (NFTs), to be available on a decentralized blockchain network.

Programmable applications and protocols created on the blockchain, the most important of which is Ethereum, allow financial transactions to be carried out automatically on the blockchain, through “smart contracts” without the need for intermediaries such as banks to mediate.

peer to peer

Unlike a bank or brokerage account, government-issued identifiers, Social Security numbers, or proof of address are not necessary in the DeFi world. DeFi transactions allow buyers, sellers, lenders, and borrowers to transact “peer-to-peer” using only computer-based systems to act as an intermediary, eliminating the need for a business or organization to initiate the transaction.

Thus, DeFi is not only changing the financing game, but in my estimation it is challenging the existing financial system by eliminating the entire game board. What this means for DeFi remains to be seen.

So what would the world look like without traditional banks, and how does this relate to the life insurance industry?

The current financial model: the hub and the spokes

The modern financial infrastructure that most of us know well is characterized by the “hub and talk” model.

Major financial centers of activity such as New York and London act as centers of the financial industry (banks and brokerage) which then influence economic activity in regional speakers or nerve centers such as Milan or Mumbai.

The economic activity or hardship then radiates from the speakers to the rest of the economy.

It can be said that this model has worked well for the past 100 years; However, some big problems have exposed flaws in the current code, pun intended.

For example, the relatively recent banking crisis that led to the Great Recession showed that some problems in the balance sheets of a few large institutions had pushed global economies into sliding into years of stagnation.

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publisher team