Insurance industry making the leap to blockchain, Business Insurance
6/20/2017 7:00:00 AM
Blockchain is making inroads into the insurance sector with the announcement of fresh initiatives aimed at expanding the use of the digital ledger technology.
Last week’s news of the initiative inbetween American International Group Inc. and Standard Chartered Bank P.L.C. was the latest in a latest run of activity around the insurance sector’s potential use for the budding technology.
AIG and Standard Chartered, together with IBM, said they had used blockchain technology to create a multinational “smart contract” by converting a multinational, managed master policy written in the United Kingdom and three local policies in the United States, Singapore and Kenya, into a format that provides a collective view of policy data and documentation in real-time, permitting visibility into coverage and premium payment at the local and master level as well as automated notifications to network participants following payment events.
Third parties, such as brokers, auditors and other stakeholders, can also be included, providing them a view of the policy and payment data and documentation. The pilot solution was built by IBM and is based on Hyperledger Fabric — a blockchain framework and one of the Hyperledger projects hosted by The Linux Foundation.
Results were promising, according to observers.
“This was a first-of-its-kind pilot that proved the concept,” Carol Barton, head of multinational insurance at AIG in Fresh York, said in an email. “This pilot shows many benefits may be possible with more scaled blockchain applications, including: Instantaneous access to policy information; reducing query time and effort; visibility into premium payment; coverage at local and master level; and several permissioned access points to policy.”
“This is a wonderful example of an innovative treatment to insurance,” said Howard Mills, global insurance regulatory leader at Deloitte Services L.P. in Fresh York. “A global insurer like AIG using blockchain to create a wise contract that will make multinational insurance coverage less cumbersome could be a big boost to global commerce.”
“I think a lot of insurance players are nosey about blockchain and they are attempting to see how it can work,” said Tracy Dolin-Benguigui, director and sector lead with S&P Global Ratings in Fresh York.
Blockchain is a digital technology for recording and verifying transactions, according to the Linux foundation, which is hosting an effort to build an industry consortium, Hyperledger, to standardize and expand its use.
“The distributed ledger is a permanent, secure instrument that makes it lighter to create cost-efficient business networks without requiring a centralized point of control. With distributed ledgers, virtually anything of value can be tracked and traded,” the foundation said in a two thousand fifteen statement. “Distributed ledger systems today are being built in a multitude of industries, but to realize the promise of this emerging technology, an open source and collaborative development strategy that supports numerous players in numerous industries is required. This development can enable the adoption of blockchain technology at a tempo and depth not achievable by any one company or industry.”
Munich Reinsurance Co. and Swiss Re Ltd., the world’s first- and second-largest reinsurers, respectively, in October two thousand sixteen founded B3i, a consortium “aiming to explore the potential of distributed ledger technologies to better serve clients through quicker, more convenient and secure services,” Swiss Re said in a statement at the time. The consortium has since grown to fifteen members including Allianz S.E., Zurich Insurance Group Ltd., Assicurazioni Generali S.p.A., Hannover Re S.E., Liberty Mutual Insurance Co., Scor S.A., Tokio Marine Holdings Inc., and XL Group Ltd., which does business as XL Catlin.
Also last week, The Bitfury Group, a U.S. blockchain technology rock hard, said it had formed a strategic partnership with advisory rock-hard Risk Cooperative to use blockchain in the insurance broking market.
The partnership will originally explore putting cyber insurance and political risk activities on a blockchain-based system, according to reports.
Bitfury has been helping national governments put data on a blockchain over the past two years, according to reports. In April, the company announced a partnership with Ukraine to put a broad range of government data on a blockchain platform. A year earlier, Bitfury signed an agreement with Georgia to pilot the very first blockchain land-titling registry.