Is Insurance Ready for Blockchain? – CSC Paper by Faisal Siddiqi
Article Synopsis :
The complex coordination of participating parties—as one encounters in, for example, a multi-party insurance claim—is not unique to the insurance industry. Blockchain’s ultimate promise is solving the ‘complex coordination’ problem, simplifying touchpoints and removing friction thus minimizing hassle and lowering – in some cases radically – related transaction costs.
CSC’s paper “Is Insurance Ready for Blockchain?” steers clear of the buzz in favour of what organisations are actually doing with blockchain in insurance today and the likely near future. Five specific areas discussed in this report include:
- Asset Tracking and Proof of Ownership: Tracking valuable assets and their transaction histories.
- Micro-insurance: Reaching untapped markets to insure assets otherwise difficult to insure.
- Smart contracts for insurance processing: Smart contracts or ‘self-executing’ contracts are being tested in the areas of underwriting, claims, policy issuance, verification and settlement.
- Peer-to-Peer insurance: Organizing groups of insurance buyers not otherwise eligible for insurance to self-insure, sharing risk, reducing cost (with no insurer involved).
- Internet of Things (IoT) self–insurance: Smart devices create self-monitoring assets ‘aware’ of their own state, interacting with smart contracts to essentially insure themselves.
Conceptually, asserts this report, blockchain can also help eliminate frauds, decrease administrative costs, and help simplify claims. As a result, start-ups and industry incumbents have begun testing blockchain in these areas.
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Digital Insurer's CommentsIs blockchain the next big disruptive technology in insurance? Though conceptually feasible, a lot of the details, including technical standards and regulation, must be worked out. Per the Financial Times, the current market cap of cryptocurrencies is a whopping $85 billion. Money and ideas are flowing into the blockchain space at an accelerating rate.
Incumbent insurers, who tend to take a ‘wait and see’ approach to radical new technologies, should at least dip a toe in the blockchain space, either alone or with partners, to form a unique, company-specific point-of-view on a potentially game-changing technology.
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