With an eye towards the growing use of blockchain technology in the digital age, the Rhode Island Department of Business Regulation (DBR) has published Insurance Bulletin Number 2018-17 to clarify that it allows insurers doing business in the state to use blockchain or distributed ledger technology, which DBR defines to mean “the use of a distributed, decentralized, shared, and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless. The data on the ledger is protected with cryptography, is immutable and auditable, and provides an uncensored truth.”
The Bulletin also states that DBR will consider an “electronic record” to “include a record or contract that is secured through blockchain technology” and an “electronic signature” as “a signature that is secured through blockchain technology.” DBR will also allow insurers to employ “smart contracts,” which DBR defines to mean “an event-driven computer program that executes on a distributed, decentralized, shared, and replicated ledger and that is used to automate transactions, including, but not limited to, transactions that: (a) take custody over and instruct transfer of assets on that ledger; (b) create and distribute electronic assets; (c) synchronize information; or (d) manage identity and user access to software applications.”
DBR’s moves echo recent remarks on the National Association of Insurance Commissioners (NAIC) Center for Insurance Policy and Research’s (CIPR) website, which notes the permanence of blockchain-based solutions as a potential benefit because they “provide a reliable audit trail and could potentially reduce fraud risk, streamline policy administration and manage claims in a transparent and irrefutable manner.” The CIPR website notes the many possible uses of blockchain technology, such as improvements to the security and efficiency in the use of protected health information, credit scores, and travel and automobile insurance, to name a few. NAIC also observes that blockchain technology could reduce administrative costs through automation of claims administration and other activities. In allowing insurers doing business in Rhode Island to use blockchain technology, DBR has provided support to allow insurers to move forward to achieve these benefits.