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What Are The Challenges To Blockchain Adoption In Insurance? 10 Experts Share Their Insights

  • 26 June 2019
  • Sam Mire

The average insurance agent probably doesn’t ride a motorcycle. The insurance industry attracts and creates conservative decision makers.

This industry’s aversion to risk could understandably limit blockchain adoption. It’s going to require proof of concept before there’s any meaningful interest. But without initial investment, the proof of concept is nearly impossible.

While insurance pioneers with deep pockets have already bitten the bullet to fund blockchain applications, many firms will remain skeptical. The burden of proof for other insurers to invest significantly in blockchain will be high. They’ll need to see that this technology will reduce costs.

Beyond industry skepticism, blockchain applications must fit into highly regulated insurance frameworks. These dictates how businesses operate, and without considerations for blockchain technology, certain regulations could be non-starters.

Once the industry warms up to blockchain, it will need to create a set of universal standards and practices. These are all significant challenges to blockchain’s further adoption in insurance, but they’re not insurmountable.


1. Christopher McDaniel, President of RiskStream Collaborative

Christopher McDaniel“The number one challenge has nothing to do with technology. The challenge is winning the hearts and minds of deeply imbedded stakeholders within industry firms, and getting their support for real business transformation. The industry has done many things the same way for 100+ years. Business transformation must be the rallying cry, blockchain is one of many tools to enable this.”


2. Avesta Hojjati is the Head of R&D at DigiCert

Avesta Hojjati“There are a number of considerations that make the blockchain platform hard to adopt when considering insurance use cases. Examples such as data structure, security, and scalability are among the top issues that need to be solved before any platform based on blockchain can be deployed as a real solution and completed within the insurance industry.”


3. Dr. Marcus Schmalbach,  CEO at Ryskex

Marcus Schmalbach“There are two: regulation and reality. The insurance industry is one of the hardest regulated industries – especially in Europe. That completely collides with Satoshi Nakamoto’s white paper published in 2008. To bring this into harmony is and will be an exciting challenge – in particular as the blockchain regulations will come gradually.

The much bigger won is reality. At many events, the blockchain is praised as the holy grail. This leads to extremely high expectations on the part of some and fear on the part of others. At an event, I was asked if the blockchain will kill jobs. I replied – the blockchain has the power to reorganize insurance’s value chain, but for this it must be used correctly.”


4. Ryan Brubaker, CIO at Seven Corners Inc

Ryan Brubaker“Many companies are developing their own blockchain platforms, meaning that they’re not compatible with one another, and there’s no clear front-runner. Early adopters run the risk of missing out on the best technology, or being stuck with a technology that quickly becomes outdated.  The lack of standards regarding the use and reliability of blockchain is a big drawback. Additionally, the insurance industry will face significant regulatory and legal hurdles before the topic of widespread implementation is possible.”


5. Thiru Sivasubramanian, VP of Architecture & Technology Strategy at SE2

Thiru Sivasubramanian“For us to take advantage of the technology, there needs to be interoperability between the blockchains in the market. A fundamental challenge is that standards must be developed for two blockchain networks to communicate seamlessly.

In terms of business stress, regulation is a challenge. While progress has been made, there is more work to be done. For instance, the state of Arizona has come out with a regulatory framework to allow financial firms to develop products using emerging technologies like blockchain. Getting consensus from regulatory bodies to start using blockchain in the insurance space will be a challenge.”


6. Hugh Karp, Founder of Nexus Mutual

Hugh Karp“Coordinating the community of participants and agreeing on standards, the path forward and how the rewards are shared. Technical challenges have largely been solved, but coordination challenges between multiple industry participants, who are often competitors will remain and will determine the success or demise of the major blockchain projects.”


7. Satadru Sengupta, CEO and Founder of Halos Insurance

Satadru Sengupta“Lack of people who understand both sides: insurance operations and appropriate use cases and the state of Blockchain and what is possible. We need more conversations.”

 

 


8. Stan Nazarenko, CEO of Piprate

Stan Nazarenko“Negative news and unhealthy levels of hype that surround the ongoing crypto-craze are still hurting pragmatic conversations about the real use cases and real benefits to the industry. We need more production deployments and more performance metrics about the impact of blockchain adoption on the enterprise. Insurance is a data-driven industry and having solid evidence of the benefits is paramount to increase adoption.”


9. Dr Mervyn Maistry, Founder and CEO of Konfidio

Mervyn G. Maistry“In order for insurers to adopt blockchain on a large scale, new business models need to be created that leverage this technology’s potential. The main obstacle that is slowing the evolution of the insurance sector towards this goal is the industry’s extremely regulated nature. In fact, the way insurers do business is defined in strict regulatory texts which explains why the offered insurance products look almost identical. This factor also represents a barrier to entry for startups that may come with innovative business models.”


10. Dean McClelland, Founder and CEO of TontineTrust

Dean McClelland“Blockchain was created as a technology to enable parties that don't know or trust each other to enter into financial transactions.

This is more or less the same use case that insurers serve in our society today so it should come as no surprise that you don't receive a wholeheartedly positive when you ask an insurance company how they could use blockchain.

Think about it, when was the last time that you embraced the question “is there a technology that could do this better than you?”.

Nevertheless, as Goldman Sachs so eloquently put it “Blockchain is the new technology of trust” and the insurers that are earliest to embrace that maxim will likely cannibalise their own businesses before devouring the market share of others through having far leaner operations.

As we have seen in the past, it is not the choice of new technology used, it is how radically the new technology is used to turn existing industry paradigms on their head that will determine success in the long run.”

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About Sam Mire

Sam is a Market Research Analyst at Disruptor Daily. He's a trained journalist with experience in the field of disruptive technology. He’s versed in the impact that blockchain technology is having on industries of today, from healthcare to cannabis. He’s written extensively on the individuals and companies shaping the future of tech, working directly with many of them to advance their vision. Sam is known for writing work that brings value to industry professionals and the generally curious – as well as an occasional smile to the face.

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