Article Synopsis :
Blockchain has so far failed to take root in insurtech. However, some first movers – the author calls them ‘trailblazers’ – are looking to blockchain to revolutionise their transformation through access to trusted information and new business models.
There are a dozen areas blockchain will bring greater efficiency, lower costs, improve data quality, enhance the customer experience and increase trust, as well as give them a seat in the broader blockchain ecosystem.
There are a number of obstacles that prevent insurers making use of blockchain. In an IBM survey of 200 financial institutions, the top six were:
- regulatory constraints (56%)
- immature technology (54%)
- lack of clear ROI (52%)
- insufficient skills (51%)
- lack of executive buy-in (46%)
- insufficient business case (43%)
However, the authors of the paper believe blockchain will deliver on its many and varied promises to reshape the insurance industry. However, technology cannot achieve this on its own. It requires collaboration between the emerging technologies, regulators, incumbents and additional stakeholders in order for it to succeed.
This paper identifies a dozen use cases for the insurance industry that will reduce human intervention and thereby reduce error and therefore risk in these operations.
- Catastrophe swap and bonds
- P&C claims settlement
- market investments
- financial audit and reporting
- index-based livestock insurance program
- flight insurance
- automating underwriting and claims settlement with the help of smart contracts
- internet of things (I0T)
- parametric insurance
- high-value assets insurance
- medical claims processing.
In many cases, the application of blockchain will greatly improve efficiency and achieve all those advantages insurers are seeking from their transformation process.
IBM believes the model for delivery will be based on open source systems, such as Linux and Hyperledger and these are at the centre of their implementation strategies.
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Digital Insurer's CommentsThe insurance industry has identified some low hanging fruit where the benefit of blockchain seems clear.
There remain obstacles, but provided regulators are satisfied with the job the technology can do and consumers are protected, there are clear opportunities for those who act now.
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