Bunyarit Suwansantawee/123RF
 

Ultimate Guide To Blockchain In Insurance

  • 3 February 2020
  • Disruptor Daily

America’s collected insurance premiums in 2017 ended up totaling $1.2 trillion. The insurance industry in this country outpaces the entire nation of the Netherlands in gross domestic product for its central role in keeping people alive and healthy in the modern world.

Wherever large financial transactions meet old-fashioned technology, blockchain technology is perfectly positioned to induce a step-change in any such “business as usual.” As a multi trillion-dollar global industry that’s been around for ages, insurance fits this description quite well.

The concept of insurance is at least a thousand years old. Chinese fishermen and traders at that time began pooling their inventory in shared funds to pay for the damage of any other’s lost or broken ship. It was a rather low-tech implementation of an idea that stuck.

While modern computers and internet technology have permanently changed entire industries over the past 20 years, the global insurance industry is still stuck in the past. From troubleshooting a payment to purchasing a new policy, a number of insurance operations are only achievable over the phone. And at a time where there’s a clear trend toward information being stored in the cloud, policies are commonly processed as old-fashioned paper contracts.  This means claims and payments are fundamentally more prone to error — they require human supervision or interaction in order to work.

At the end of the day, there’s still the general overwhelming complexity of the insurance landscape. It has to unite consumers, brokers, insurers. and reinsurers around the main idea — that there is value in having protection against risk in all its various forms.

But these disparate insurance industry entities need to conduct business with each other faster than ever before if they’re going to actually enter the 21st century. It’s going to take a sea change in technology to successfully win over these old-school players to a new way of thinking.

But that technology is here today, and it’s called the blockchain. It’s a cryptographically secured form of shared record-keeping. In other words, it lets you keep data completely safe and hidden from all except the people who have permission to see it.

This technology has seen considerable hype as the backbone for popular cryptocurrency Bitcoin, as well as for enabling near-anonymous transactions on the dark web. But signs suggest that the blockchain’s truest world-changing potential lies in waiting for some of the most old-fashioned fields out there. There are real regulatory hurdles in the way to making blockchain a new normal within insurance, but the momentum is beginning to brew there.

It’s why a number of blockchain-minded companies have set their sights on the insurance industry specifically.

Chapter 1: Blockchain 101 

Blockchain in insurance 101

People can be hard to trust, especially when there’s technology involved.

Human history tells us that the world is full of unknown, unpredictable people. Many of them might be our close friends or family who are fundamentally on our side. But just as many might be malicious tricksters looking for a sucker to con. A number of technological solutions, particularly those that are blockchain-enabled, work to push back against those companies and individuals who’d otherwise be taking advantage of us. (Go ahead, we’ll wait while you send your banking details to an anonymous emailer who says he’ll give you a gold deposit.)

But if trust is the problem, then decentralization is the technologically enabled solution. This idea drives the entire blockchain concept, and in simplest terms, it says that you don’t store all your data in one place. You let other people store fractions of the whole, and before anyone changes anything on their fraction, they all have to agree to it.

Malicious cyberattacks ultimately depend on gaining access to information that the attacker shouldn’t have, but blockchain changes this paradigm forever as a decentralized database technology. Rather than store uses a single computer to store information in a single database, blockchain uses a network of computers scattered around the world that work together to maintain one database. When authorized users change the data stored there, other nodes on the network monitor it to confirm a legitimate update, then broadcast this updated information to the rest of the network.

This mechanism lets blockchain operate in a so-called “trustless” fashion. Whether people trust each other or not (even if they explicitly don’t trust each other), they can still transact in a trustworthy fashion. Preserving a decentralized ledger requires participation from the community of users that depend on it — the two people in the transaction aren’t necessarily involved in confirming it. That check gets outsourced to the community, who supervise the transaction to make sure it’s valid.

For cryptocurrency transactions, this means unknown third parties can confirm your receipt of some amount of Bitcoin and update your wallet balance for you, just as you might do for them. For blockchain applications in the insurance industry, this means validated, verified data can be transmitted as easily and securely as a large insurance premium might be paid on the same network.

Every piece of data represented on a blockchain comes with a figurative “seal of approval.” Insurance agents might see a blockchain-validated death certificate in order to confirm they needed to start paying life insurance. Patients can see an itemized, validated tab of everything they’re paying for when they send money to the insurance company.

Wherever information and financial transactions are involved, blockchain technology will emerge as a difference-maker. Read on to learn the five major benefits this technology stands to bring to the insurance industry.

Benefits of blockchain in the insurance Industry

1. Increased efficiency/streamlined processes

Short-term efficiency gains are perhaps the most immediate demonstration of blockchain promise within the insurance industry.

2. Risk mitigation and fraud reduction

This sector already employs a number of fraud investigators and people who are otherwise out to verify some sort of truth. Blockchain provenance enables so-called “trustless technology,” which manages to bring trust to computer networks by removing the human need for it altogether.

3. Increased transparency

Insurance tends to come with opaque bureaucracy attached to it, and it’s not always clear what processes might be running behind the scenes. Blockchain transactions generate an auditable data trail, which means anyone interested can look up a process and why it might be occurring.

4. Reduced costs

The efficiencies of today are the reduced expenses of tomorrow. Wherever a process can be automated, dollars can be stretched, and blockchain excels at automating certain financial and data operations.

5. Improved security

The decentralized nature of the blockchain means it’s very difficult, even on the verge of impossible, to penetrate or maliciously attack.

The future’s potential for delivering significantly improved technology is rather unrelated to the present-day status quo. Just because a given tech sector is stagnant one day doesn’t mean it can’t be a livewire of progress and development the next day.

That’s why it’s important not to discount the many smaller, steadfast teams working within the insurance industry to not only make next-generation blockchain technology-friendly but make it compatible with the ordinary systems that define insurance business as usual.

Chapter 2: State of blockchain in insurance

State of Blockchain in Insurance

The state of blockchain in the insurance industry is highly comparable to its state in other industries: it’s immature and underdeveloped, but experts agree that it holds wide-reaching potential to change the way work gets done in this sector.

The demonstrated evidence is that blockchain is in its research and development phase right now when it comes to insurance. Those paying attention to emerging technological trends within their industry already understand how powerful it will be for insurance. Its transformative potential will be so self-evident in the long-term that organizations are working to find the best applications for it.

Blockchain is a generally dense topic, and insurance is rather the same. Talk of how these two entities might interact with each other can easily devolve into a conversation requiring lots of regulatory insight. Neither blockchain nor the insurance industry is especially well-understood.

That’s why the world’s insurance companies have their eyes trained on blockchain technology. They are simply playing a “wait and see” game that’s perhaps more conservative than the business tactics employed by a newbie cryptocurrency startup. They’re not unaware of the blockchain — not by a long shot — but they’re not necessarily in a hurry to fix unbroken processes.

We stand at a clear beginning of a niche offering rather few product implementations. Of all the projects aimed at this intersection, nearly all are focused on reducing administrative costs for large insurance companies.

Here’s some of the top blockchain milestones from the insurance industry in recent history:

✔ The People’s Insurance Company of China (PICC) is actively opting for blockchain-powered insurance products (September 2018).

✔ Canada-based insurer Marsh announced a collaboration with IBM Blockchain to launch a commercial version of an insurance verification program (September 2018).

✔ Australia’s largest bank debuted a blockchain-powered money system for those receiving disability insurance (November 2018).

✔ American insurance giant State Farm announced its testing of blockchain implementations to expedite automobile insurance claims (December 2018).

✔ Health insurance giant Aetna announced it would join the Healthcare Blockchain Alliance (December 2018).

✔ The state of Vermont unrolled a pilot project driven by the blockchain to bring enhanced protection to captive insurers, which are licensed insurance companies formed by one or more parent entities to provide self coverage (January 2019).

✔ Marsh debuted a blockchain-powered proof of insurance app to its US customers (April 2019).

✔ Popular crypto exchange CoinBase revealed it was insured for up to $255 million (April 2019).

✔ MetLife announced its initiative to automate all insurance claims via the blockchain (June 2019).

✔ Insurance blockchain firm BlockClaim raised $600,000 of seed money (June 2019).

✔ Insurance giants USAA and State Farm closed a deal that would see them pay each other on the blockchain (June 2019).

Each one of these events lends subtle momentum to the idea that blockchain technology can fundamentally change business as usual within insurance operations. In the aggregate, it seems a committed pool of players are making a calculated bet that blockchain will be a new normal for moving data from one place to another.

The question of blockchain adoption within the insurance industry is actually no question about the technology itself. Blockchain methodology is already well-proven, it’s only a matter of getting certain stakeholders within industry firms to wake up to it.

But we’re not there yet.

Challenges to blockchain adoption in insurance 

1. Changing people’s minds

Christopher McDanielThe insurance business consists of a number of stakeholders who may or may not see the promise of a newfangled technology called “blockchain.”

“The industry has done many things the same way for 100+ years,” said Christopher McDaniel, president of RiskStream Collaborative.

“Business transformation must be the rallying cry, blockchain is one of many tools to enable this.”

2. Playing nicely with regulations

Marcus SchmalbachRegulations exist to protect consumers and maintain trustworthy transactions. But they are often outdated artifact of outmoded thinking. Modern insurance regulation can’t instantly account for the blockchain because it’s only just recently been doing so for the internet. “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,” said Dr. Marcus Schmalbach,  CEO at Ryskex. “To bring this into harmony [will be] an exciting challenge – in particular as the blockchain regulations will come gradually.”

3. Interoperability

If this newfangled technology is going to play nicely with us across all aspects of our lives, then it needs to work with other versions of the same thing. For a fully frictionless future, we need a set of standards must for blockchain networks to communicate seamlessly.

4. There’s a lot of hype

Stan NazarenkoBlockchain technology is almost intrinsically linked to talk of popular cryptocurrency Bitcoin, as well as enabling nearly anonymous transactions on the dark web. This doesn’t exactly spell opportunity for those in the insurance space. “Negative news and unhealthy levels of hype [are] still hurting pragmatic conversations about the real use cases and real benefits to the industry,” said Stan Nazarenko, CEO of Piprate. “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.”

If these clashes can all condense around a single issue, it’s this: blockchain is a very new technology, and insurance is a rather older business that’s been around for generations. It hasn’t exactly needed to change much in the past, so why should it change now?

Successful adoption here will fundamentally be slow at the outset. Larger organizations are less likely to vote for what’s new in a conservative industry. It will be the smaller, committed crews serving these healthcare giants that end up showing them the blockchain-enabled future that they’re already inhabiting at present.

Or at least that’s the big idea.

Trends shaping blockchain in insurance in 2020 

1. Interoperability

Insurance information lives across a lot of disparate networks, and they might not all be compatible with each other. The doctor might do things a little differently from the insurance office, and that might be all it takes to add new complexity to how their computers interact with each other. But by moving data storage and data transfer to the blockchain, entities would only need to connect to the same blockchain in order to access any data shared there.

2. Fraud prevention

The insurance industry literally hires people to investigate the truth. Blockchain’s auditable provenance systems mean all data is stored heads-up, and people are free to browse any interactions on the blockchain they wish. In the case of Bitcoin, they are able to see which wallets send money to each other and how much they send. In insurance systems, it might track signed documents between patient, doctor, and guardian. This not only generates a very handy record, but makes it easy to detect certain kinds of fraud within the industry.

3. Blockchain as backend

In other words, the idea is that blockchain will start taking a backseat to the products that it drives. Instead of making people wonder what the blockchain is and how it works with a given product, customers will only need to ask themselves whether they like the product or not. As blockchain gets more invisible, it will become more effective.

Chapter 3: Insurance Industries That Will Benefit From Blockchain

Insurance Industries That Will Benefit From Blockchain

1. Travel insurance

When flights get canceled, travel insurance is there to make sure your head lands in a bed instead of an airport armrest. Travel insurance is a generally bureaucratic undertaking, but blockchain technology raises the possibility of more easily buying travel insurance via a decentralized mobile app. Travel insurance is a great hedge against uncertain travel conditions, and its offerings are easily positioned on the blockchain.

2. Car insurance

Drivers can not only get more affordable quotes, but resolve their accident claims more quickly when they do it using a blockchain-driven system. This alleviates that pesky paperwork and greatly simplifies the underwriting process: all data related to previous damages and repairs can be stored in a decentralized public ledger. This makes it a snap to calculate the value of your car on the fly.

3. Health insurance

Although it’s central to a lot of political discussion lately, health insurance is a mainstay of the insurance space and isn’t going away any time soon. Blockchain technology can improve health insurance functionality as well as how health care providers operate. This industry can connect medical institutions with patients through advanced data analysis. It can also help the uncovered get covered more quickly, comprehensively, and affordably.

4. Life insurance

There’s quite a bit of paperwork involved when life insurance processes turn the death of a loved one into a financial payout. This makes it difficult to run those processes effectively, and that means people end up waiting longer for news or updates on the status of their claim. Blockchain technology could even combine the death claims and death registration processes by uniting all the involved parties (the insurance companies, funeral homes, government, and beneficiaries, to start). Smart contracts could then execute their designs to automate processing, saving time and money for all the people involved.

5. Title insurance

The Wall Street Journal names Sweden the first country to bring blockchain to title insurance. Sweden’s 400-year-old Lantmäteriet, the country’s land mapping and registration authority, is asking for volunteers to participate in blockchain land title transfers.

6. Property and casualty (P&C) insurance

Firms operating in the P&C space might make claims processes three times faster and five times cheaper by implementing blockchain-backed systems. This technology helps prevent common issues related to dealing with insurance, like detecting fraud and preventing risks. Using blockchain technology to issue insurance policies means claims and payment processes can be more automated and accurate at the same time.

Chapter 4: Problems Blockchain Can Solve in Insurance (And Who is Solving them)

Problems Blockchain Can Solve in Insurance (And Who is Solving them)

The insurance industry suffers the drawbacks of being an age-old industry that’s heavily dependent on paper files and bureaucracy. Industry data comes from fragmented sources, middlemen inflate processes, the industry is prone to fraud, and it’s complicated to onboard clients in a compliant manner while also making any kind of remarkable turnaround time.

If it feels like it’s always been this way, it’s because the industry is generally resistant to change. But blockchain promise is on its way to realization within the insurance business. It is a one-of-a-kind technology that can keep highly detailed records in a completely secure and compliant platform, but even keep track of who approved or changed certain details.

This represents a sea change in terms of what’s previously been possible within the industry. You can only design solutions that are so elegant as long as they depend on physical pieces of paper. Bridging this gap from physical substance to digital trust and authority simply hasn’t happened before. Just as a modern internet unloaded new convenience and shaped reality in the developed world, blockchain efficiencies are sure to be widespread within old-fashioned-feeling businesses like insurance. But as blockchain use cases begin to push back against these real industry problems, the proof will be too positive for larger entities to take notice.

There are four big problems that blockchain technology can help solve within the insurance industry.

Problem 1: Fraud detection

Insurance fraud is any act committed to defraud an insurance process — faking someone’s death to collect their life insurance, starting a fire to collect on house insurance, and so on. Insurance fraud is the term for when someone attempts to gain an insurance benefit or advantage they are not entitled to. It can also refer to an insurer knowingly denying someone any benefits that they are due.  some benefit that is due.

There are genres of fraudulent insurance schemes, and they have names like premium diversion, fee churning, asset diversion, and workers compensation fraud. It’s not so easy to arrive a dollar amount of money stolen through insurance fraud — it’s deliberately undetectable, unlike assault or murder.  We only know that the total number of cases of insurance fraud being detected is much lower than the number actually being committed.

The Coalition Against Insurance Fraud conservatively estimates that about $80 billion was lost in the United States through insurance fraud.

How blockchain could solve fraud detection

Insurers already employ full-time staff to look into the veracity of people’s stories in order to be sure they’re paying out appropriately. The industry is clearly concerned with truth and provenance because it knows fraud is real.

Blockchain is a noted use case for any operation that calls for verifying and validating data. WIth figurative seals of approval able to be tracked on paper documents, blockchain technology can tame lots of bureaucratic knots.

List of companies using blockchain to tackle this problem

Company 1: Etherisc

etheriscCEO: Christoph Mussenbrock

Location: Munich, Germany

What they do: Etherisc offers a travel insurance project designed to save customers from the pains of flight delays or cancellations.

How they use blockchain: By bringing many oracles (data providers) together on one blockchain-driven platform, Etherisc can make use of validated data to prevent cases of fraud at the surface level (like filing a claim on a flight that is already known and confirmed to have safely landed on time).

Company 2: Insurwave 

Insurwave logoDirectors: Shaun Crawford, Mike Gault, Ian Meadows

Location:  London, England

What they do: A collaboration of business entities, including EY, Guardtime, A.P. Møller-Maersk, Microsoft, and ACORD, banded together to launch marine hull insurance platform driven by the blockchain, called Insurwave in 2018.

How they use blockchain: By storing validated data about boat make and model, as well as equally confident data on any individual crashes they may have experienced, the process of checking against fraud is virtually automated.

Company 3: MedRec

MedRec LogoPrincipal Investigator: Andy Lipman

Location: Cambridge, Massachusetts, United States

What they do: Designed by MIT, MedRec is a decentralized content platform for medical records that makes it easier to share information with trusted parties.

How they use blockchain: The insurance companies might tag MedRec for verified data as they gather information on potential claims. Not only is that level of data easily retrievable from a large decentralized network, but it’s easy to confirm that the documents or records stored there are the ones actually meant to be there.

Problem 2: Claims prevention and management

Notoriously tied down by paperwork-heavy processes, the insurance industry doesn’t move especially quickly to close business. There are inevitable wait times to settle questions related to payments, update life circumstances (like if you get married or divorced), and generally interface with companies in this sector. Even getting someone on the phone can be a pain.

But blockchain can automate many everyday business operations within the insurance industry in order to bring new convenience and advantage to the space. Moving data operations into a digital space that can still remain highly trusted and secure means complicated approvals and updates are accomplished at speeds more commonly associated with email instead of bureaucratic delays.

Whenever outdated business processes achieve updated, optimal designs, the businesses using them gain a competitive advantage. As their fundamental processes increase in speed and simplicity, the overall operation enjoys improved results.

How blockchain could solve claims prevention and management

A standard task within the insurance industry, like confirming or denying a claim, let’s say, is often highly dependent on paperwork and supporting documentation that seeks to confirm a customer is entitled to his or her claim. It’s subject to a high level of scrutiny, and trails of custody are especially important as data moves between parties to close business. But once this paperwork is digitized while still retaining a high degree of trust and verification, blockchain automation makes it possible to process documents in a workflow as easily as checking email on your phone.

It’s generally a highly niche, complicated pursuit to move an insurance claim on its way to completion — especially within the rickety, outdated industry environment of late. But future blockchain-enabled sharing mechanisms will bring this specific insurance-focused business communication to a form factor as comfortable and familiar as text chat.

List of companies using blockchain to tackle this problem 

Company 1: B3i

b3iCEO: John Carolin

Location: Zürich, Zurich, Switzerland

What they do: B3i builds blockchain-enabled applications for the insurance industry. Their first product is an insurance product against catastrophe excess of loss. Capable of moving claim data between parties on the blockchain, it’s expected to become available early in 2020.

How they use blockchain: They use the blockchain in a lot of exploratory and diagnostic ways to figure out how best this technology fits within an established (if aged) industry. Insurance is as dependent on signed paper documents as it’s ever been. It will take an unignorable product to make the market flinch.

Company 2: DropIn 

DropInCEO: Joseph Shemesh

Location: Los Angeles, California, United States

What they do: DropIn offers a system for getting livestream consultation with healthcare staff. The app uses your smartphone to transmit verified information to a health team for use in verifying an insurance claim. The rest of their infrastructure is about moving claim details from one place to another in a secure, compliant fashion.

How they use blockchain: DropIn uses the blockchain as a secure yet accessible database for those operating in the insurance space. With easier data retrieval and attribution, DropIn is another layer of care to your in-person checkup.

Company 3: Synechron

SynechronCEO: Faisal Husain

Location: New York, New York, United States

What they do: Synechron offers a “blockchain accelerator” for bringing new advantage in the insurance industry. Its software process turns insurance claims processing into a scenario in which customers no longer submit conventional claims and insurers don’t technically administer claims. Smart contracts running on a decentralized blockchain database enable a level of auto-execution for handling processes by trusting information transmitted in a very secure way from independent and trusted authoritative sources.

How they use blockchain: Blockchain technology brings a level of automation and objectivity about information. This engenders an environment of testable trust for any market player looking for secure storage opportunities enabled by blockchain technology.

Problem 3: Property and casualty insurance

Property and casualty insurance (also referred to as P&C insurance) is a product aimed at protecting you and your property. The “casualty” part of the equation specifically refers to liability coverage that might help protect you if you're found at fault for an injury-causing accident. These categories of insurance are commonly packaged together single policies, like homeowners Insurance, car Insurance, renters insurance, and so on.

The property and casualty insurance industry as a whole faces obstacles on its way to some kind of refined, frictionless form. These issues stem from outdated technology infrastructure and that infrastructure’s inability to keep up with contemporary standards around convenience and turnaround time.

How blockchain could solve P&C insurance

Just as any niche within the larger insurance industry needs secure mechanisms for moving data from place to place, P&C operations have the same needs for processing claims with any kind of balance between turnaround time and fiscal need of receiving money owed. P&C insurance businesses harnessing a blockchain edge would significantly accelerate their processes toward processing claims and unleashing any funds owed to the customer with highly automatic precision.

These are the kinds of benefits every business seeks: how can they more easily share trusted information in order to make an informed decision as a complex organization? As a specialized way to share data in highly secure, trusted environments, blockchain’s promise to the insurance industry looms like a sleeping giant for all except the firms in a position to experiment.

Insurance is already a highly dense, multilayered industry that calls for high levels of specialization and expertise in order to arrive at solutions that last, and P&C insurance is a brand of this business with its own even more highly specific standards and best practices. But at the end of the day, businesses serving this sector ultimately need to move data from place to place in a secure fashion.

And some blockchain-attentive companies are already at it.

List of companies using blockchain to tackle this problem

Company 1: VouchForMe

vouch-for-meCo-founders: Matt Peterman, Tom Volk

Location: Vaduz, Vaduz, Liechtenstein

What they do: VouchForMe (formerly known as InsurePal) is a Slovenia-based company that’s developed a decentralized and self-regulating insurance-minded blockchain platform. It uses peer-to-peer assessments to bring increased social proof and transparency to insurance policies. People get to see how much money they’re paying, as well as where exactly that money ends up going. Insurance business operations are rather opaque, and with more sunlight on this solving this niche transparency issue, solutions like VouchForMe can take root.

How they use blockchain: The company administers sentiment- and statistics-gathering polls via the blockchain, and the results are similarly stored there in a tamper-proof fashion. This makes it all highly resistant to meddlesome actors who might be seeking to con insurance companies.

Company 2: The Generali Global Corporate & Commercial Italy collaboration

Generali Global Assistance

What they do: Representing a distinctly group effort across a number of related business organizations, Generali Global Corporate & Commercial Italy teamed up with AIG Italy, Unipolsai, AON, Willis Towers Watson, and the Capgemini Italy consulting firm to minimize inefficiencies in the Italian insurance market. Specifically seek to help clients in the risk evaluation and placement phase of someone becoming a customer.

How they use the blockchain: This cooperative effort’s output is an insurance product that enables insurers and brokers to share information on a quotation in real time. It also provides a suitable environment for preparing policy documents in a way that leaves them totally valid and verifiable. Feedback suggests it can reduce the amount of time involved in negotiation and quotation timing by as much as  90 percent. It also improves the quality of the data they’re able to share because it all happens in one place with a lot of audit trails.

Problem 4: Underwriting 

Underwriting in insurance refers to evaluating different clients for risk and taking stock of their potential exposures. Underwriters decide how much insurance someone should receive and how much they should pay for it. They may also decide not to insure someone. Underwriters are the people crunching complicated insurance numbers in pursuit of optimal business outcomes.

Different insurance companies have different guidelines for what kinds of risk they’ll tolerate (and how much). Every decision in this arena is highly based on historical and present-day data, so its business operations call for a multipurpose database technology to establish a new normal for the space.

Underwriting businesses depend on having easy access to high-quality data in order to make the best decisions. Although computers already figure into this work today, blockchain technology is poised to significantly improve business as usual.

How blockchain could solve underwriting

Blockchain deployments in underwriting may automate certain complex processes, or otherwise significantly accelerate the amount of time they take under present-day conditions. They would also bring enhanced provenance to the data actually stored by the associated database — users could confirm the data is trusted and accurate, as well as identify with whom the data originates.

List of companies using blockchain to tackle this problem

Company 1: Black Insurance 

Black Insurance logoCEO: Risto Rossar

Location: Tallinn, Harjumaa, Estonia

What they do: Black endows MGAs and brokers with underwriting abilities. Tagging the blockchain as its underlying technology, Black endeavors to create the most efficient insurance carrier in the world. Their product will see your first policy written far more quickly that the standard insurance customer is used to, and data generally moves between trusted parties more easily.

How they use blockchain: As a vessel for storing information with a high level of precision, blockchain forms the underlying architecture for sending and receiving information throughout this organization. This raises automation for increased efficiency across a variety of business processes.

Company 2: RiskStream Collaborative

RiskStream CollaborativePresident: Christopher G. McDaniel

Location: Tallinn, Harjumaa, Estonia

What they do: RiskStream Collaborative is a collection in insurance industry leaders aimed at unlocking the blockchain’s potential for widespread use across the industry. Members include mainstream players like BB&T Insurance Holdings, Amerisure Mutual Insurance, Geico, and Liberty Mutual, and many others. Organizations like RiskStream are a clear representation of the industry-at-large’s awareness of blockchain technology, and an earnest step to approach it and fully understand it.

How they use blockchain: An offshoot of larger organization The Institutes, which serves the role of educating people on the property and casualty insurance industry, RiskStream Collaborative is the group specializing in making hypothetical blockchain implementations into reality and seeing how workable they are within the realities of the insurance industry.

Company 3: IBM 

IBM logoCEO: Arvind Krishna

Location: Armonk, New York, United States

What they do: IBM has a blockchain initiative specifically aimed at the insurance industry. They develop blockchain-powered products that stand to unlock new efficiencies from existing infrastructure.

How they use blockchain: Engineers have developed openIDL, a network built on the IBM Blockchain Platform with the American Association of Insurance Services (AAIS). This software automates insurance regulatory reporting and makes it easier for customers to be more compliant, which is certainly of interest to P&C insurers. Blockchain automation improves efficiency and accuracy for insurers and state insurance departments alike.

Chapter 5: What’s the future of blockchain in insurance?

What’s the future of blockchain in insurance

It seems a safe assessment that we are only seeing the insurance industry’s first exploratory stabs into implementing blockchain technology and unlocking new efficiencies. As a next-generation vehicle for securely storing and sharing information (as well as satisfactorily move money around the world with effectively zero chance of third party interference.

The rise of blockchain technology within insurance is sure to echo its rise across similar industries that we tend to take for granted. They aren’t necessarily just sexy startups, but sometimes corporate behemoths, that can make compelling proof points for this emergent technology. Blockchain methodologies are a rare breed of development, packing enough transformative potential to establish a new normal for industries that have proven almost completely resistant to change.

The insurance industry will gather momentum around blockchain rather quickly. With use cases mounting, here’s what the experts call for at this intersection:

1. Blockchain will add powerful efficiencies to insurance companies embracing the technology

This realized potential is already visible in the professional finance world, where the heads of large banking institutions make headlines about blockchain technology every time they say something of substance about it. “The efficiency gains and ROI for blockchain are staggering,” says Christopher McDaniel, president of RiskStream Collaborative. “Eventually we will see new products, channels, and new ways of doing business, but in the short-term efficiency plays are the number one benefit.”

2. A generalized wake-up call to the industry

Large insurance businesses often have the luxury of shaping the rules they play by and then not changing them for years. By virtue of operating in an open-source “heads-up” fashion, blockchain technology will bring new transparency to the industry that will require competitors to innovate on what used to be largely complex processes. “I have been part of this industry for more than 15 years and I have never experienced such an atmosphere of new beginnings,” says Dr. Marcus Schmalbach,  CEO at Ryskex. “The blockchain is certainly not a panacea for everything, but it ensures that the industry questions itself, its processes, solutions and business models.”

3. It gets easier to prove you are the insurance customer you say you are 

From the doctor’s office to the emergency room, medical professionals need to know you are who you say you are if they’re going to deliver a maximum quality of care. Blockchain-validated patient ID systems would surely add a new base layer of security within insurance applications. Blockchain technology is uniquely able to confirm identity for the sake of business. “[Blockchain] can be used to create encrypted digital ID cards for policyholders, a form of identification that would be impossible to fake,” says Ryan Brubaker, CIO at Seven Corners Inc.

4. More insurance systems will be compatible with each other by virtue of running on blockchain

Insurance data is often highly fragmented and the systems that connect disparate records with other relevant data aren’t necessarily designed with ease of use in mind. This means that there is industry efficiency yet to be harnessed by simply speeding things up and making all that data interoperable. “It's all about the ability to coordinate between each other more effectively,” says Hugh Karp, founder of Nexus Mutual. “At the moment, blockchain provides some cost savings which will likely improve in the near future but longer term it is massively underestimated and could be transformational.”

Blockchain’s general promise for the insurance industry is clear: the industry is always going to depend on securely storing and transmitting data, and this database technology will present undeniable advantages in the medium- and long-term future.

For now, it is only a number of smaller business organizations or collaborations operating at the intersection of blockchain and insurance. But the amount of activity here is surely enough to confirm that use cases will ripple to more widespread attention throughout the industry in due time. The insurance business has long benefited from its conservative, bureaucratic processes, but blockchain implementations will unlock new transparencies that manifest as competitive advantage within the business.

The insurance industry tends to be highly opaque and slow-moving, but blockchain is a next-level foundational technology due to transform this business over time.

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