How a smart combination of Blockchain and IoT can improve your workplace safety and lower insurance costs

The average workplace accident costs a US enterprise $20,000, and the most serious fatalities can breach $100 million; whether or not a company is in an inherently dangerous industry, safety is its number one priority.

Acceptance of workplace injuries and fatalities continues to shrink while the associated financial penalties grow. The ever-evolving combination of the Internet of Things (IoT) and blockchain will allow safety-leading enterprises to build stronger relationships with their insurers and save big; IBM is pioneering this with major industrial firms.

IoT has reached the safety sphere; connected smart sensors and analytics allow companies to monitor working conditions and long-term worker health to improve safety, eliminate compensation payouts, and slash insurance costs. IoT in combination with blockchain can revolutionize the insurance game. Real-time data on worker safety and health can be uploaded from IoT devices, in an immutable form, to a blockchain—with almost every insurance carrier planning or piloting blockchain initiatives, companies proving to be at the forefront of safety by embracing the IoT will save lives and drive down their premiums.

Manufacturing, construction, and mining companies are already pushing the safety agenda with IoT

US companies forked-out nearly $60 billion in worker compensation in 2018. In 2017, they recorded close to 3 million non-fatal injuries. Quick math suggests every accident costs a US company $20,000 on average. Fatalities are a little more expensive: a first-hand story from industry suggests that fatal accidents were risk-assessed (off-the-record) at $10 million per person… in reality, the cost of a legal proceeding was, at that point, edging the company closer to $100 million.

IBM, Garmin, Guardhat, Mitsufuji, and SmartCone recently partnered to identify hazards and monitor worker safety with Watson IoT technology in construction, mining, and factories, among other settings. Biometric and environmental data identifies hazards and risks in near-real-time from wearables, smart devices, and sensors, allowing workers to quickly respond and react to problems and changing conditions. Improvements in safety, working conditions, and long-term health aim to drive down insurance costs.

The combination of blockchain and IoT promises to revolutionize worker insurance

IoT is very much a technology of today when it comes to safety. Blockchain is widely considered a technology of the distant future, despite the hype; however, the views and actions of insurers suggest its time has come. The prospect of blockchain as a revolutionary tool in insurance is well documented. The HFS Blueprint Report on Insurance Operations Services in 2018 showed that 93% of insurance carriers have plans to leverage blockchain. HFS’ 2018 Enterprise Blockchain Services Top 10places insurers as “rapidly adopting blockchain and moving beyond pilots to drive real value” from the minds of 550 blockchain engagements with 15 service providers. B3i summarizes this; it’s a startup formed by 13 leading insurers, including Allianz and Zurich, that provides insurance solutions on a blockchain platform for efficiency, growth, and quality throughout the value chain.

In a homogeneous industry, smart contracts managed on a blockchain allow insurers to drive down operating costs and pull ahead of their competition via automated evidence documentation and payout triggers—providing a huge reduction in paperwork and manual filing procedures.

Regardless of your enterprise’s level of skepticism, this is happening, and investing now will save you pain and money down the line (see Exhibit 1).

Exhibit 1: Explaining how IoT and blockchain could improve worker safety and slash insurance costs

^{Source: HFS Research, 2019}

It’s not that simple—but it’s not unsolvable

Blockchain initiatives can faulter when there is no way of ensuring the validity of the data being uploaded and made immutable (the “garbage in, garbage out” principle, according to the HFS Blockchain Bullshit Buster.)  Combating this is the ability of IoT and smart sensor monitoring of working conditions and worker health, to be uploaded in immutable form, in real-time, to a blockchain.

Blindly quoting “the network effect” also commonly hinders blockchain adoption; getting all necessary parties together from industry, insurance, and regulation on to one blockchain solution is easier said than done. Enterprises must also, in combination with insurers and regulators, define how they will consider pre-existing medical conditions and avoid unfair and unethical practices, such as workers with higher risks of heart attacks becoming priced such that they’ll be un-hirable. They must ensure that immutable personal data is not stored on the blockchain and instead securely connect records in separate locations, only providing access when necessary.

A similar demonstrating of this combination can be considered in the car insurance space. Car “black-boxes” allow individuals to save on insurance costs if they drive sensibly. Combined with blockchain and widespread smart car-rollout, instant reporting of crash data and liability would mean that individual’s stories can’t be twisted; claims are then paid automatically through smart contracts.

The Bottom Line: Your insurers are moving toward blockchain. Plus, ever-evolving IoT solutions can turn this into real value by improving safety, eliminating compensation, and slashing insurance costs

Until we reach a nirvana-like state where no one is killed or injured at work, safety will always be companies’ number one priority. The financial risk is clear, even before considering the benefits: $20,000 for an accident and $100+ million for a fatality.

The level of safety that workers currently enjoy is a result of a total mindset shift that everyone should leave work in the same state that they arrive. The next wave of safety-revolution will come about through technology and innovation; it will put a meticulous focus on long-term health effects and have zero-tolerance for injuries and fatalities.

Ballooning IoT coverage will soon allow companies to improve worker safety and monitor long-term health, mitigating the financial penalties of high insurance premiums, lost staff-hours, compensation, and fines. In combination with blockchain, pioneering companies will be able to demonstrate their standards to further drive down insurance costs. Putting in the time and investment into safety innovations now will only lead to smoother transformations and regulation down the line.