The spotlight has fallen on the likes of bitcoin and blockchain in recent weeks. But how can insurers benefit from cryptocurrency and the platform that carries it? Jonathan Jardim, senior developer for Rubix Digital Solutions, subsidiary of SilverBridge Holdings, takes a closer look.
At its most basic, the blockchain can be defined as a distributed digital ledger in which transactions made in a cryptocurrency (like bitcoin) are recorded chronologically and publicly. In essence, the blockchain facilitates secure online transactions. Because it is decentralised and used to record transactions across numerous computers, records cannot be altered retroactively.
“While many believed the blockchain will not have a significant impact on the insurance industry, the rise of fintech start-ups has changed this. More nimble and innovative (at least according to perceptions) than the more legacy-driven insurance companies, fintechs are embracing a host of forward-thinking solutions to attract customers,” he says.
Customers are increasingly on the look-out for insurance solutions that are more tailored to their unique needs, resulting in fintechs starting to gain a foothold in the market. This means traditional insurers need to change their approach to not only product development and customisations, but also the way policy claims are filed and paid out.
“Distributed ledger technology is about more than just providing a medium for bitcoin transactions. With insurance being driven to a large extent by the claim process, the blockchain seems to be an ideal way to automate processes that are still mainly paper-driven, manual, and prone to human error. Already, a significant number of banks globally are experimenting with the technology to improve customer transactions. Why should insurance be any different?”
Similarly, Swiss Re and several of Europe’s biggest insurers joined forces to put the blockchain through its paces and see how it can make their business more efficient. In the announcement, the establishment of the Blockchain Insurance Industry Initiate (B3i) is focused on looking at how distributed ledger technologies can better serve clients through faster, more convenient, and secure services.
In fact, research by PWC shows that while insurers have been slow on the uptake of the blockchain, it makes sense given how multiple participants need views of common information. In addition, the removal of a ‘central authority’ record keeper that acts as an intermediary, has the potential to reduce costs such as fees and complexity, for example multiple reconciliations.
“The digital business landscape is seeing insurers continuously needing to reinvent themselves to adjust for customer demand. The blockchain provides a great opportunity to capitalise on a different way of doing business that benefits all stakeholders from the customer right through to the insurer itself,” he concludes.