The last 12 months have seen the discussion on Bitcoin permeate almost every industry. News and hype surrounding the cryptocurrency was ubiquitous as speculation abounded. If Bitcoin, then, is the hype, Blockchain has the potential to be the force which drives change not only in our vocabulary, but revolutionises the way we do business. Since its creation as the underlying technology that bitcoin operates on, organisations across the world have been exploring ways to implement this technology and develop new ways of delivering their services to their clients, such as streamlining their operations. Not since the introduction of cloud computing has a piece of technology made such an impact on the ways in which businesses can operate with their customers and partners.
The blockchain network lives in a state of consensus, one that automatically checks in with itself on a regular basis. As a self-auditing ecosystem of digital value, the network reconciles every transaction that happens at regular intervals. By allowing digital information to be distributed but not copied, blockchain technology is creating the foundation of a new type of Internet.
Blockchain isn’t siloed to the financial or retail industries. It is a technology, which allows secure international transfers, regardless of the value of the unit being transferred. Subsequently, it has the potential to revolutionise industries that are primarily run on written contracts, such as the insurance industry.
Information held on a blockchain exists as a shared and continually reconciled database, meaning at the moment it would appear as blockchains are just as secure as a locked vault. With blockchain being a decentralised system and is continuously evaluated and regulated by the users it is in principle extremely safe for the distribution of smart contracts. For industries which require collaboration between stakeholders a private blockchain can remove the inevitable manual admin that underpins any major contract between multiple stakeholders.
Blockchain and the Insurance Industry
Although it has a reputation for conservatism when it comes to technology, the insurance sector has recognised the benefits of technologies such as AI sooner than many other industries, leading the charge in cognitive computing implementation. Tata Consultancy Services’ (TCS) recent Global Trend Study on Artificial Intelligence shows that the insurance industry records the biggest AI spend per company, and across different industries currently implementing AI, insurance ranks 4th with an average cost reduction of 13.8 per cent as a result.
Although the insurance industry is currently suffering from a wait and see mentality, I believe we’re on precipice of companies having the capability to run their entire company on a blockchain. With consumers no longer content with long lead times, the slow drawn out process of brokers negotiating contracts and constantly making small amendments to a single master document is potential drawing to a close. Especially as consumers are starting to understand efficiencies and security measures implemented into blockchain systems.
The future implementation of a blockchain
Individual insurers across the industry have begun to allocate significant resources to researching and implementing working private blockchain systems. For instance Swiss RE, a leading global insurer, has teamed up with the likes of Allianz, Zurich and Aegon to create a ‘Blockchain Insurance Industry Initiative B3i’ aiming to explore the potential of distributed ledger technologies to better service clients through faster, more convenient and secure services. Expected to go live this year, it is predicted to gain a 30 per cent increase in efficiency compared to traditional processes, achieving this by reducing reconciliation, duplication of work and waiting times.
TCS’s Technology Unit has gone one step further and created the TCS Integrated Blockchain system which it initially introduced into the financial industry. This Proof of Concept (PoC), although not yet present within the insurance industry, allows a number of financial services companies to exploit the potential of blockchain. Utilising this tech, companies have been able to transfer secure information such as contracts to their partners and work simultaneously on the document. I see no reason why this ability is not transferable and cannot be used by global insurers and brokers in the near future.
TCS has already introduced blockchain technology into customer service applications. Singapore Airlines is using TCS’ blockchain-based loyalty management application to allow its customers to share their frequent flyer miles with their friends and colleagues. This ability to share virtual points is unlocking the value of miles accumulated by customers in Singapore Airlines ‘KrisFlyer’ frequent flyer programme.
Although we are still a few years from seeing a blockchain being used in the mainstream insurance industry I believe the significant research being carried out and the working PoCs that are currently on the market is exponentially speeding up the process. The benefits will be hard to ignore, from smoother claims processes and improved efficiencies to fraud prevention and pay-as-you-go (usage-based) insurance. Once insurers trust a blockchain to securely transfer information, its implementation into the industry will only be a matter of time.
Fridtjof Detlefs, Head Insurance Practice, Tata Consultancy Services (opens in new tab), Europe
Image Credit: Zapp2Photo / Shutterstock