How blockchain is set to shake up the insurance industry
AS BITCOIN and blockchain increasingly feature in the media, the questions of who can benefit the most from crypto-currencies and the platforms that carry them become more pressing.
Bitcoin is a digital, global currency that people can use to perform transactions across the internet. Blockchain, as it pertains to Bitcoin, is a public online ledger of all executed Bitcoin transactions.
Jonathan Jardim, senior developer for Rubix Digital Solutions – a subsidiary of SilverBridge Holdings – says insurers stand to benefit from this form of financial technology (fintech).
Blockchain can be defined as a distributed digital ledger in which transactions, such as those made in Bitcoin, are recorded chronologically and publicly.
In essence, blockchain facilitates secure online transactions, and, because it is decentralised and used to record transactions across numerous computers, records cannot be altered retroactively.
Jardim says: “While many believed that blockchain would not have a significant impact on the insurance industry, the rise of fintech start-ups has changed this. More nimble and innovative (at least according to perceptions) than the more legacy-driven insurance companies, fintechs are embracing a host of forward-thinking solutions to attract customers.”
Customers are increasingly on the look-out for insurance solutions that are tailored to their unique needs, resulting in fintechs starting to gain a foothold in the market. This means traditional insurers need to change their approach, not only to product development and customisation, but also to how claims are filed and paid out.
“Distributed ledger technology is about more than just providing a medium for Bitcoin transactions. With insurance being driven to a large extent by the claims process, blockchain seems to be an ideal way to automate processes that are still mainly paper-driven, manual and prone to human error,” Jardim says.
“Already, a significant number of banks globally are experimenting with the technology to improve customer transactions. Why should insurance be any different?”
Swiss Re and several of Europe’s biggest insurers have joined forces to put blockchain through its paces and see how it can make their business more efficient. Their establishment of the Blockchain Insurance Industry Initiate, also referred to as B3i, is focused on looking at how distributed ledger technologies can better serve clients through faster, more convenient and secure services.
Research by accounting firm PricewaterhouseCoopers shows that, although insurers have been slow on the uptake of blockchain, it makes sense given how multiple participants need views of common information. In addition, the removal of a “central authority” record keeper that acts as an intermediary has the potential to reduce costs and complexity.
“The digital business landscape is seeing insurers continually needing to reinvent themselves to adjust for customer demand. Blockchain provides a great opportunity to capitalise on a different way of doing business that benefits all stakeholders, from the customer right through to the insurer itself,” Jardim says.