Other parts of this series:
When the code is cracked, insurers must be ready to pivot
I’ve certainly written about blockchain before. In fact, two years ago I likened it to the beginnings of the once-revolutionary concept of the Word Wide Web and how even that had its detractors. Since then, blockchain has continued to grow as a hot topic in financial services, and has drawn serious investment and collaboration among leading insurers and other players. It may not yet be a major focus for every insurer, but one thing is clear: Those not ready to pivot smartly to adopt the technology when ”the code is cracked” are going to miss out on big opportunities, and almost certainly will fall behind.
Accenture research indicates that 33 percent of insurers are planning to use blockchain in the next two years and another 36 percent have it on their agendas for consideration. Although not every organization aspires to be on the cutting edge of blockchain research, those that do not must be ready to react to those that do.
Insurers that are not ready to pivot smartly to adopt blockchain technology when it mainstreams, risk becoming irrelevant.
Gartner notes that the secondary ripple effects of digital-business innovation often prove more disruptive than the original innovation. It forecasts that blockchain will increase business value by slightly more than $176 billion by 2025, and exceed $3.1 trillion by 2030.
Gartner further anticipates that by 2020, new businesses and business models will emerge based on smart contracts and blockchain efficiencies. We already are seeing some of this in the insurance sector, even as exploration of the technology continues.
For insurers, blockchain technology provides greater transparency, accuracy and efficiency, and is providing a core for new partnerships. Blockchain is showing up in pilots, proofs of concepts, and new collaborations, helping insurers improve the way they process claims, manage complex multinational transactions, securely store and share data and even prevent fraud.
Over the past year:
- Allianz unveiled a blockchain prototype for self-insurance or captive products, a highly complex area of commercial insurance that can encompass multiple countries and millions of dollars of insured assets. The blockchain solution will increase the efficiency of such international insurance transactions.
- Prudential teamed up with Singapore telco StarHub and insurtech Cites Gestion to launch Fasttrack Trade (FTT), a blockchain-based digital trade platform for small and medium-sized enterprises (SMEs) that will also sell insurance. The platform will allow the insurance, telco and fintech partners to grow their respective customer bases.
- In a sector-wide initiative, 14 European insurance providers have partnered with blockchain company Stratumn to create a solution that streamlines data flows among them, allowing them to securely store customer data and comply with new EU regulations on customer mobility.
- Nationwide has begun testing the RiskBlock proof of insurance tool to allow insurers, regulators and law enforcement to determine insurance coverage in real time and eliminate paper insurance cards. The product was developed an insurance-industry consortium led by The Institutes.
Property-casualty insurers leading in blockchain are already offering products built on distributed ledger technology and are accepting cryptocurrency for premium payment. In addition, some of the largest players in the global insurance and reinsurance markets have joined alliances, such as R3, the Post Trade Distributed Ledger Group and the B3i consortium to explore the technology.
For insurers that hope to quickly adopt blockchain technology when clear lines are drawn around what is viable and valuable, there are three models for leveraging distributed ledger technology—an inter-carrier, intra-carrier and an ecosystem model. There are also a number of key considerations to inform targeted blockchain engagement.
Next week, I will explore the different blockchain models and the potential each offers.
Meanwhile, for more on this topic, read Unblocking blockchain: Unlocking the value of distributed ledger technology for insurers.