Other parts of this series:
Find out what our Blockchain Breakthrough in Insurance panelists had to say at InsureTech Connect.
For years now, distributed ledger technology (DLT)—and its best-known example, blockchain—has been touted as a game-changer for the insurance industry, on a level with cloud computing and the internet itself. However, while the potential benefits of DLT are undeniable, many insurers are wondering if the reality will live up to the hype.
I recently had the privilege of moderating a panel at the 2019 InsureTech Connect conference in Las Vegas, which shared insights from four blockchain experts with real front-line experience of blockchain in insurance and cross-industry:
- Ryan Rugg, Global Head of Industry Verticals and of Insurance, R3
- Christopher McDaniel, President, The Institutes RiskSteam Collaborative
- Rich Meszaros, Global Lead for Industry X.0 Digital Transactions, Accenture
- Bob Olson, CIO Reinsurance, Aon
It was a valuable discussion on DLT’s impact on insurance, both what has already happened and what the future holds. Here are four key takeaways from the talk.
- Blockchain is proving its value right now
Although there’s been a lot of hype around DLT in insurance, the panel agreed that we’re past “peak hype” and moving quickly into the period of real applications and measurable results.
One of the uses of DLT in the industry that is rapidly approaching maturity and widespread adoption is in reinsurance. Most reinsurers, right now, spend a lot of time and money reconciling data from many different parties. DLT, as an immutable public ledger of data, promises to simplify and speed up this process exponentially, and it’s already doing this in many proofs-of-concept.
Most first-generation blockchain plays focus on efficiency because their ROI is most easily measured. The real space-age, quantum-leap advancements made possible by DLT, such as next-level underwriting and risk management, are further off.
- Blockchain is a team sport
Another key point that the panel agreed on was that the value of DLT is fundamentally based on communication and collaboration. It’s a networking tool, and networks of all kinds, from highways to smartphones to social messaging services, create more value as they connect more nodes.
For a single organization to go it alone on blockchain makes as much sense as someone putting together a basketball team with a single player. Collaboration—with all of the challenges, risks and rewards that this entails—is the way toward real value with DLT applications.
This idea is corroborated by recent research from Accenture, which found that consortia and ecosystem partnerships are two of the most important ways that blockchain is delivering value to insurers right now.
- It’s about more than insurance
The group’s discussion touched on a remarkable range of industries, products and trends beyond the world of insurance. These included:
- Self-driving cars and telematics
- Supply chains for groceries and sporting goods
- Payments processing developments at major banks
- The European Union’s General Data Protection Regulation
DLT’s applications reach far beyond insurance, but because of the nature of the technology, many of these applications have outcomes that are highly relevant for insurers. Some of these might mean new competition—for example, the amount of data that car manufacturers can capture about drivers thanks to DLT might position those manufacturers to jump into the insurance market. Other consequences create new efficiencies and better products for the industry. For example, the proliferation of DLT is going to create many new sources of high-quality data that insurers will be able to incorporate into their underwriting.
- We’re just getting started
Perhaps the most interesting part of the discussion came right at the end, when I asked each of the expert panelists to look ahead and predict what blockchain would mean for insurance in 10 years’ time. Their answers suggest that the industry is on the cusp of tremendous change. New revenue streams, distribution channels, operational improvements and competition are all set to reshape the industry from end to end.
The main take-out? Tomorrow’s winners will be those who invest in DLT today.
To learn more about how blockchain is already transforming the insurance industry, check out The Blochchain Breakthrough in Insurance report.
Or, if you’d like to continue the conversation about blockchain and insurance, I’d love to hear from you. I can be reached here.