Blockchain is not just for banking… insurance wants it too
There has been a tremendous amount of discussion, white papers, excitement and debate over the past few years about the potential of blockchain technology to transform the financial services industry and beyond. The World Economic Forum has identified blockchain as one of its six megatrends.
But the only thing that is clear at the moment is that there is still a lot of work to be done to implement wide scale use cases, clear up any regulatory uncertainly or barriers and educate institutions and employees about the technology and its potential. Until recently, most of the discussion and pilots have been focused on banking.
Perhaps somewhat unfairly characterised as always arriving late to the tech party, insurers are now starting to take a serious look at blockchain technology and how it could improve the performance of the industry in some key areas. Recent announcements about the Blockchain Insurance Industry Initiative (B3i) and from the London Market Group indicate that research and exploration around the use of the technology is accelerating across the insurance industry and across the insurance value chain.
Crucially, start-ups are the leveraging the technology to build the products and services that will deliver blockchain based solutions to the insurance/re-insurance industries. Smart contracts, for example, have the potential to reshape systems and could underpin the automation of the claim processes; resulting in both cost savings to the insurer and, crucially, better experiences for customers. It also allows for the automation of trust – a customer need not rely on an insurers decision to pay a claim or not as particular outcomes, linked to events, could be coded into contracts from the start.
The opportunity for fraud reduction, built on a distributed and immutable ledgers, is embedded in technology and would be dynamic rather than reactive. Blockchain technology creates the foundation for improved cyber security as well. Lower costs and improved security are a clear incentive for an industry facing the challenges of high costs, low interest rates and a growing threat from insurtechs.
Challenges and obstacles remain however, not least of which is the organisational changes that would be required within and across insurers. Join us for a fulsome discussion of the challenges and opportunities blockchain technology presents for the insurance industry at the upcoming Blockchain and Insurance Summit, part of the InsurTech Rising conference. The conference will be held on 14-16 November 2016, with Banking Technology as its media partner.
By Lisa Moyle, director of strategy, fintech, at FinTech Futures Series (Banking Technology’s sister company)