Other parts of this series:
Blockchain technology looks set to redefine the insurance broking value chain. It will improve efficiency and lower costs significantly.
This blog series has so far explored how blockchain introduces a new approach to provable trust for the insurance industry. One of ways that this will change the game for commercial insurance brokers is by streamlining back-office processes.
Blockchain-enabled smart contracts are more than just a key enabler of operational excellence; they could fundamentally reshape parts of the traditional broking value chain, providing the ability to significantly lower transaction costs. The digital broker can use blockchain-enabled smart contracts to simplify and streamline many existing back-office processes.
Blockchain paves the way for a cost efficient, streamlined back office that transforms a cumbersome multiple-touch entity into a low-touch seamless-transaction processor. This supports a key trend in the industry: the effort to standardize and automate commodity-based activity in order to allow for a greater focus on value-adding tasks.
From a value-chain perspective, blockchain-enabled smart contracts are more than an automation technology. They bridge the disconnect between organizations, removing the need to synchronize systems used to manage the lifecycle of an insurance transaction. They can reduce or even eliminate the need for reconciliation, as parties to a transaction work from a golden source of data.
This in turn increases the speed of settlement, which is expedited by the automation of associated decisions governed by predefined conditions embedded in smart contracts. In the same way, renewals can evolve from an expensive convoluted process into an automated one. From a regulatory perspective, blockchain-enabled smart contracts are able to significantly reduce compliance complexity across the lifecycle of a contract through the automated, immutable traceability of data.
The true disruptive potential of blockchain, however, lies in the foundation it offers for utilizing other emerging technologies. Its fundamentals – trust, transparency and immutability, together with automation enabled by smart contracts – will underpin digital ecosystems that leverage the Internet of Things (IoT), new productivity platforms, application programming interfaces (APIs), smart advisors and advanced analytics.
For instance, configured on blockchain, an exchange could be created that provides a digital platform for brokers to submit risks for quotes from insurers with whom they have no previous arrangement. The exchange would have secure encrypted user identifications acting as a decryption key, while smart contracts would orchestrate the quote-to-bind process.
Brokers must assess the use of blockchain technology as a foundation to embrace the next big thing – and get ahead of the game. My next post will offer some ideas about where and how brokers can get started. To learn more, download this report: Using blockchain to get ahead of the game .