by: Ronnie Kher, Kevin Rutter
What questions do we address in this insurance in blockchain series?
What is new about blockchain technology?
Blockchain technology allows insurance firms a new way to coordinate information between each other, by using a pre-agreed technology solution, instead of a third party’s bookkeeping. The technology enables different firms to set rules over particular insurance assets or contracts within a shared platform environment.
Further, if a blockchain has the right data privacy architecture in place, each insurance firm can maintain the same amount of control over their data as today, but with more flexibility with the data. In this way, blockchain technology builds upon a greater trend towards cloud-based open “platforms” at the industry-level and moves away from inefficient walls that impede efficient transacting.
What problems are solved by blockchain technology?
While on a business front insurers have been innovative across property and perils, the supporting technologies and infrastructure remain anachronistic and inefficient. The costs of the fragmentation and inefficiencies within insurance are well documented:
Blockchain technology is not a panacea that magically solves all of these problems, but with the right architecture a platform can address and reduce these inefficiencies.
Additionally, insurance firms should continue to address changing consumer preferences. A small business owner today expects the same customer experience when buying insurance as when shopping on Amazon, while expecting the cross-sell opportunities provided by American Express. There are also new revenue and growth opportunities in cutting edge industries such as cyber insurance that blockchain technology will help enable.
What are today’s “killer apps”?
Insurance is a traditional industry with origins dating back to 1450 BC. It often sits on the sidelines during periods of innovation. We see the blockchain space evolving first with relatively “easy wins” requiring minimal regulatory involvement or interaction with nascent technologies like the Internet of Things (IoT). These first use cases over the near term (1-3 years) will generally aim to lower expenses. We see the following use cases gaining traction as more applications continue to go live:
In the longer term, we expect innovation across the wider ecosystem to develop alongside complementary technologies like IoT and artificial intelligence.
Blockchain technology offers great promise across many avenues. This is the first of several blog posts on blockchain’s impact on insurance.
We will articulate use cases across the insurance value chain while explaining why Corda’s architecture and design for a universal, interoperable network often will be the best fit, if the effort intends to go into production. Blockchain technology can add value to many insurance business segments — commercial & specialty insurance, life insurance, personal lines and health insurance, along with niche areas like marine and trade credit.
Further, insurers are increasingly taking charge with both formal and informal industry consortia around the world. Most major insurers have an innovation lab internally and insurers are actually taking the lead in terms of live blockchain apps, great news for an industry looked upon as backward. Blockchain technology promises to be the right grease for the insurance innovation wheels.
How can you get involved?