It appears that there is an increased FOMO among people and they want to learn about Blockchain. Established insurance companies are investing in blockchain app development to transform insurance processes. Businesses are creating consortia around it. Investors are pouring in funds. Yet no one had heard of the blockchain just 4 years ago. Only a few had understood the idea of a digital ledger, let alone blockchain applications in the insurance industry.
But, now things are changing. The buzz suggests that the blockchain revolutionizes the market, raises trust, disrupts the supply chain, and provides new avenues for innovation. Throughout the financial services sector, clear evidence indicates that blockchain technology could help allow greater productivity, growth, and competitive advantage. It won’t be long before the insurance industry continues to concentrate, spend and implement blockchain technology rapidly.
Insurers who neglect this new architecture would end up with higher premiums to keep up with. At Oodles, we think of the blockchain as an engineering architecture. It is one of the primary delivery innovations that could help connect new-age developments such as wearables, drones, and Internet-of-Things (IoT) connected devices to enterprise technology systems. But in the future, it will underpin the sector’s growth.
Who are the investors?
Blockchain technology is finding use cases in nearly every field. The most active innovators are emerging from financial services organizations. More than 40 financial services companies (or their strategic acquisition arms) have invested in a blockchain or associated start-up since early 2014. Essentially, it has found applications across other fields of finance. They include insurance and wealth management. It has got support from institutions like B3i and the Nimbrix consortium. With major activity in the government, healthcare, supply chain, and real estate markets, the real economy is also getting in on the act.
How is the industry reacting?
In the context of the ‘data-driven 4th industrial revolution,’ some of the more proactive insurers are turning to blockchain to help accelerate their larger change agenda. These first and second trends see the importance of engaging in the greater blockchain network of financial services. But they also see blockchain as an incentive, among other advantages, to boost performance, reduce transaction processing costs, improve user service, improve data quality, increase trust between parties, and promote auditability. To help their vision, many have been investing.
In February 2016, AXA Strategic Investments (along with other partners) invested around US million in a blockchain start-up. In 2015, USAA invested around million in digital currency exchange. And blockchain has been included by Lloyd’s London Sector as part of their target modernization strategy for the operating model.
Other players are exploring possible blockchain solutions in the insurance industry, including Allianz, AIA, New York Life, Mitsui Sumitomo Insurance Company (MSIG), Swiss Re, John Hancock, and Manulife Financial. Instances of blockchain use can fall into two broad categories:
Cases with internal use
These do not rely heavily on network impact but usually seek to increase internal performance to minimize serving costs. But our experience shows that these programs can also produce considerable top-line sales growth. Indeed, our work with leading organizations indicates that the top-line growth produced by the simplification of internal processes can surpass the anticipated reduction in operating costs.
Cases of market use
These usually focus more on network effects and require a larger buy-in from business or cross-industry. The most prominent blockchain alliance in insurance is currently B3i, revealed in October 2016 by Allianz, Aegon, Munich Re, Swiss Re, and Zurich.
Applications of blockchain in the insurance industry
Popular Use Cases
Travel and life insurance
Establish a blockchain-based travel insurance model of ‘pay as you go’ that offers instant payouts in the case of delays or termination.
Personal injury insurance
Create a transparent and streamlined course of claimants that drastically increases customer satisfaction.
Use the blockchain in a single, secure and open archive to build, organize and preserve company documents.
To digitize and verify customer records and enhance security, use blockchain-based identity solutions.
Simplify scope assurance and streamline the resolution of claims to increase operating performance and eliminate costs.
Encourage simple claims induced by smart reinsurance contracts and templates to be automated.
Build a “golden stream” of security bond knowledge that is open to all members in real-time.
Build a peer-to-peer network without the need for an intermediary or administrator with smart contracts.