As Hurricane Florence barrels down on the Eastern coast of the United States a new kind of disaster relief is on the horizon.
Currently, when hurricanes and other natural disasters strike, a whole fleet of insurance professionals goes into action. From insurance adjusters and agents working for insurance companies to minimize fraud, to reinsurance companies that protect insurance companies, and retrocessionaires that look after the reinsurance companies, the entire industry starts to look a lot like a Russian doll of loss prevention.
The end result of the complicated web of professionals that stands between a disaster and a payout can sometimes be weeks or months of delays while otherwise avoidable suffering continues unchecked.
To bring some sense to that chaos, and perhaps remove a couple layers of redundancies and inefficiencies in the process, Switzerland-based Etherisc is part of a growing global effort to automate parts of the process using self-executing code, or smart contracts on the ethereum blockchain.
If successful, the work to move the insurance workflow to a shared, distributed ledger of transactions could eventually lead to the automatic pay-out of certain kinds of support. But for now, victims of Hurricane Florence now heading at a speed of 140 miles per hour towards several Eastern states will have to wait.
“We'd love to offer policies in Virginia,” said Etherisc co-founder Renat Khasanshyn, referring to one of the likely places the category four hurricane could touch down. “Yet launching a product in multiple locations is no easy task."
Etherisc was founded in 2017, as an open source platform to help create insurance products using the ethereum blockchain. After raising $3.6 million in an initial coin offering (ICO) the early-stage startup is already helping other companies write insurance policies using the smart contract code. By plugging in data from trusted third parties for everything ranging from cancelled flights to wind speed a wide range of pay-out events could be automated.
For exmaple, in response to last year's Hurricane Maria, an insurance policy powered by Etherisc technology is now being developed by HurricaneGuard, an insurtech startup based In Puerto Rico. At stake is more than the approximately 225,000 insurance claims that remained unresolved four months after the hurricane touched down, but an estimated 3,700 deaths that resulted from lack of access to medicine and other provisions following the disaster.
"Our plan is to begin writing policies for the next hurricane season in Puerto Rico,” said Khasanshyn.
After that, Etherisc hopes to use wind data from Colorado State University to trigger certain insurance pay-outs elsewhere around the world. "Our interpretation of the underlying numerical weather model shows that hurricane Florence will slow down its progress over the land which may cause significant losses,” said Khasanshyn.
If Hurricane Florence touches down as expected later this week it will be only the fourth category four hurricane on record to do so in the region, and is estimated to destroy as many as 759,000 homes with a reconstruction cost value of $170.2 billion.
The application of a distributed ledger used by insurance counterparites may seem far-fetched, but French insurance giant AXA has already launched an ethereum-powered flight insurance tool that automatically pays out for cancelled flights, and a consortium of the largest insurance companies in the world has formed B3i, a for-profit entity aimed at implementing a wide-range of insurance tools using the R3 distributed ledger.
As for HurricaneGuard the founders last month met with the office of the commissioner of insurance of Puerto Rico and are currently seeking a license to sell insurance in the region. In the meantime, HurricaneGuard co-founder and team lead Jonathan Gonzalez says the project is onboarding its first distribution partners and finalizing its incorporation in the state of Delaware.
“While we are definitely tracking Florence closely and running test policies,"said Gonzalez, "we can't officially offer policies in a location without getting the required regulatory approval."