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the creation of “smart contracts,” said Ted Stuckey. He leads the global innovation lab at QBE Insurance, which is based in Australia but has offices in the U.S., including one in Sun Prairie, WI. Stuckey said part of the idea with a smart contract is the ability to input its terms into electronic devices ahead of time, so that a particular event triggers a corresponding action. This practice is sometimes referred to as “parametric insurance,” he said, and can make sense for things like coverage for hurricanes and other catastrophic weather events.
“At the onset of the contract, a source of truth is agreed upon by the insurer,“ said Stuckey, a member of Thursday’s panel. “If the storm hits a certain mile-per-hour top speed, then the contract executes. It’s really good for that because it’s very event-based. You can definitively say on the blockchain that X happens, so Y events take place. It gets recorded. Money gets paid out. Everyone is happy.”
Blockchain ledgers could also help with micro-insurance policies that farmers in the developing world take out on their animals, Stuckey said. As an example, he said, a microchip could be placed into a cow after it is born, and that would be recorded on the ledger. Then, if the cow were to die, the chip would pick that up and, depending on the terms of the contract, potentially prompt a payment to the policyholder’s mobile device, he said. (Stuckey noted that QBE does not sell this type of policy.)
Another panelist, Pramod Achanta, discussed a separate application for blockchain technology in developing countries, where counterfeit pharmaceutical drugs are common.
“What if we used blockchain to solve that problem, where you understand where that medicine is produced?” said Achanta, a partner in financial markets and blockchain at IBM (NYSE: IBM).
But for all the promise that blockchain seems to offer, what if there’s a disagreement over a transaction handled using the technology, and it ends up in court?
Elizabeth Brown, an associate professor of accountancy at the University of Wisconsin-La Crosse, said that from a legal perspective, there are both pros and cons when it comes to examining data recorded to a blockchain ledger. On one hand, if smart contracts become widely adopted, that could result in fewer people needing to hire lawyers to settle disputes.
But it could get tricky when, say, trying to establish which jurisdiction should govern a smart contract.
“That has huge implications because consumer protections can vary, sometimes quite dramatically, from one state to another,” said Brown, who took part in the panel discussion. “At this very initial stage, there is a lot of legal issues that need to be addressed.”