Blockchain can offer benefits to policyholders, but legal certainty needed to enable maximum innovation


Insurance Europe has published its response to a consultation by the European Insurance and Occupational Pensions Authority (EIOPA) on blockchain and smart contracts.  

Insurers across the EU and beyond are currently developing blockchain initiatives to explore its potential to streamline business operations and to better serve their customers. 

Experiences so far have demonstrated the potential that blockchain technologies and smart contracts can offer both consumers and the industry in the future. This includes advantages in terms of more secure and faster transactions, fraud detection, low operational costs, greater transparency and reliability of data, and improved traceability.

Blockchain and smart contract deployment are, however, still very much in the early stages of maturity. Insurers must therefore be able to continue developing initiatives and the industry should be given time to explore the viability of the technology and its potential applications before any further steps are considered by regulators or policymakers. Moreover, the aim should be to ensure an innovation-friendly regulatory framework and to remove unnecessary obstacles to the deployment of blockchain technology solutions in the financial sector.

Furthermore, the underlying principles of blockchain technology already raise certain questions with regard to compatibility with existing legislation, particularly concerning the use of personal data. Certain requirements of the General Data Protection Regulation (GDPR), for example, such as the right to be forgotten, create legal uncertainty and limit the potential use of blockchain technologies that are designed to be an immutable and permanent record of all transactions. A lack of legal certainty is therefore likely to result in companies being reluctant to adopt blockchain technologies due to concerns around breaching GDPR provisions.

This creates a need for a coherent European approach to blockchain and a common understanding of how existing rules should be applied. It is therefore worth considering the recommendations of the European Commission Expert Group on Regulatory Obstacles to Financial Innovation, which proposes issuing guidance on the application of the GDPR in relation to the use of new technologies in financial services. 

Moreover, ensuring the successful deployment of blockchain solutions in the future will require continued cooperation between all stakeholders to foster legal certainty and avoid any further obstacles arising as a result of standardisation or interoperability issues.