Blockchain and What it Means for Insurance Product Development

So what is blockchain? I quite like the explanation of Gary Nuttall – head of the LMG Target Operating Model’s Blockchain innovation stream – whose analogy compares blockchain to other protocols such as TCP/IP or HTTP, as these protocols got built into hardware and software they largely get taken for granted, with people these days talking only about “the web”, “instant messaging”, “streaming” or “email” without any reference to the underlying protocols that enable the magic to take place.

Blockchain is very much software infrastructure, something that in years to come may exist at the heart of many systems but not referred to. According to Nuttall; “Bitcoin is the next big protocol associated with the name Satoshi Yakamoto who is a person that doesn’t actually exist. That is quite scary – we are talking a new protocol and technology and we don’t even know the person that created it! Leaving that aside, the protocol is Bitcoin but the technology that underpins it is Blockchain.”

For those looking to understand blockchain technology, looking at Bitcoin is a good place to start. It is after all one of the first implementations of blockchain, and was implemented with the ability (if not intention) to disrupt the way that modern money systems work. As intriguing as the technical aspects of blockchain are, the real key is the business advantages that it can bring, understanding those for your organisation/sector is key to being able to work with the business to help it make decisions such as what new products can be offered or what efficiency savings can be made.

Blockchain Driving New Product Development

The key point is that the CEO in 2016 does not want so much efficiency from IT, the bigger prize is more about generating profitable new products. Blockchain offers an opportunity for Financial Services companies – with insurance being at the more conservative end of that spectrum – to look at generating new products while, of course, creating efficiencies (through greater collaboration) as well. In my next blog I explain what a distributed ledger is.