Blockchain Tackling Insurance Woes

Blockchain technology can be applied to a range of industries, from time stamping to registering land ownership. The insurance industry has been taking note of the technology, with the insurance giant Lloyds recently providing a risk report on the currency behind the technology, bitcoin. Now bleeding edge technology companies are applying the immutable ledger to insuring physical assets.

Leading this charge is EverLedger.io, a startup looking to use a hybrid blockchain to eliminate diamond fraud, who hopes to eventually use the technology behind the digital currency, bitcoin, to solve problems in all industries affected by insurance fraud.

The startup, which was barely more than an idea three months ago, has done quite well for itself so far. It secured an investment from the international British bank, Barclays, after graduating from the bank’s accelerator earlier this month. EverLedger.io is also reportly one of the 7 accerlartor alumni exploring a partnerhip with the global bank, including Safello.

EverLedger has chosen diamonds as the company’s first target, not only because of how large the industry it is, but also how unique each stone is. The startup uses the blockchain technology stack developed by Eris Industries, on top of the Bitcoin blockchain, and has already began to “embed” diamonds into the Bitcoin blockchain. EverLedger is getting the diamonds to embed from major certification houses around the world, and four London-based insurance companies.

Most diamonds are currently certified through paper or analog methods, which could be easily tampered with. The problem of fraud is a multi-billion dollar one, with losses in London alone counted in the Billions. London is a major diamond dealing centre, and also the city the startup is based in.

“If you have a 5 carat diamond, not only do we capture the serial number that’s inscribed on the stone, but most diamonds are described with four Cs (the cut, the clarity etc). We take not only those four Cs, we then take the 40 metadata points that make up the diamond. The laboratory houses inspect the stone, they effectively digitize each of those diamonds… All of the angles and the cuts and the pavilions and all of the crown. And we take all of that, as well as the serial number, as well as the four Cs, and we put all that into the blockchain.” – EverLedger CEO Leanne Kemp told TechCrunch.

According to Kemp, if a thief steals one of the blockchain certified diamonds they would have a natural economic incentive not to change the stone, shaping or cutting it would reduce its value. “I’m not a payments person. I’m not in the banking space. But when I saw what the fundamental principles of the blockchain provided it was just patently obvious to me that would make sense around reducing fraud related instances of valuables,” Kemp added.

“This made a lot of sense to me. Just at a very basic level, you have an immutable ledger that’s distributed. Diamonds are a global problem, in terms of document tampering and fraud, and we know in London it’s a $2 billion problem, so this can work. Let’s make this work!”
— – Kemp

It is no surprise that an early-stage startup building a product with two still very experimental technologies has yet to clarify exactly how they implement their product. Everledger seems to be focusing on business and government opportunities first, like law enforcement and insurance companies themselves.

Kemp noted that putting these tools in the hands of law enforcement could give them an unprecedented ability to track the smuggling of stolen, or illegally mined, diamonds. Besides just the characteristics of the diamonds itself, they hope to include data of where it was originally mined, by whom, and presumably, the stone’s whole journey among the supply chain.

EverLedger says the startup is currently in talks with Interpol, Europol, and other major police agencies. And of course, the same benefits could hold true for insurance companies who have very little ability to track such diamonds right now. They might find the technology so beneficial that they offer incentives for diamonds to be recorded in the blockchain.

Kamp also sees consumer use cases, and has plans to release an app that users could use to verify, record, and track diamonds. Beyond diamonds, and short of all insurance offerings, they plan to move into all luxury goods next, saying it is a market that could really use such a service. One example the CEO gave was to check for whether goods sold on e-commerce websites were genuine or counterfeits, a large problem for the digital industry.

“These are very real problems in the luxury goods industry. In the first instance around diamonds we could turnaround and provide API services to eBay and Amazon to say actually you’ve got a seller… that’s just listed a diamond that’s actually been involved in an insurance claim over the last six months in London. And so therefore it becomes an onus on either eBay or an alert system somehow to say… this at one point was claimed as a stolen or a lost diamond.”
— – Kemp