> For the complete documentation index, see [llms.txt](https://adamdavidlong.gitbook.io/lawsnap-guide-to-smart-contracts/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://adamdavidlong.gitbook.io/lawsnap-guide-to-smart-contracts/applications/smart-contract-use-cases/insurance.md).

# Insurance

Insurance is a compelling use case for smart contracts

Smart Contracts offer the insurance world -- both buyers and sellers -- the ability to

* vastly cut costs
* make the process of handling claims much more efficient
* allow for new types of insurance to cover new types of risk

## Potential applications of smart contracts insurance

Smart Contracts work best in applications where the parties can use objectively measurable, independently available data to calculate the payout.

> As aerial imagery, sensors, connected devices and other technologies continue to become more sophisticated, they will create newer and more accurate streams of data ripe for analysis and application. **Any time you can meaningfully connect risk to a given data set, there’s an opportunity to employ parametric insurance**.

[Rethinking the Limits of Parametric Insurance,](https://www.insurancejournal.com/news/international/2019/09/24/540903.htm) by Michael W. Elliot (Sept. 24, 2019)

| Application                                                                                                                           | Objective Data                                                |
| ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- |
| [Crop Insurance](/lawsnap-guide-to-smart-contracts/applications/smart-contract-use-cases/insurance/crop-insurance.md)                 | Weather data                                                  |
| [Flight Delay Insurance](/lawsnap-guide-to-smart-contracts/applications/smart-contract-use-cases/insurance/flight-delay-insurance.md) | FAA or other official records of flight arrival and departure |
| Reputation Insurance                                                                                                                  | customer sentiment on twitter                                 |
| Business Interruption Insurance                                                                                                       | Government data on a pandemic                                 |

## Challenges with implementing insurance contracts as smart contracts

One of the major challenges for setting up smart contracts insurance contracts is that many insurance policies are inherently subjective.

In this regard parametric insurance has important similarities with [derivatives](/lawsnap-guide-to-smart-contracts/applications/smart-contract-use-cases/derivatives.md)