Blockchain Applications in Insurance

“Smart contracts. I have no idea how they are going to work but I have a feeling they are going to make a big impact in insurance. Imagine buying an airline ticket and when that flight is cancelled or delayed you automatically get reimbursed. I think an insurance policy has the potential to operate on the same basis. If there is some irrefutable basis for identifying that a claim has taken place rather than going through the painful process of claiming then smart contracts are fascinating.” Speaker at the September 2016 Insurance Technology Congress

Attending the recent Insurance Technology Congress in London was inspiring. Topics ranged from A.I. underwriters to machine learning, 21st Century peer to peer I-mutuals to the connected home and, of course, the word that is on everyone’s lips – the blockchain.

More precisely we should probably refer to blockchain and its symbiotic twin feature, the smart contract, as the two fit together like IT and Infrastructure. What is it about the blockchain, the so-called distributed ledger that along with smart contracts seem set to take the world – that includes our inwardly facing insurance sector - by storm? In 2017 there will be many insurance pilots for blockchain.

Setting up a Blockchain

There are already far easier ways of setting up blockchains than previously. The MS Azure, platform for example, within the cloud environment where you are able to split up blockchain applications. These are not fully fledged insurance applications, they are building blocks that developers can build on. Likewise, Amazon’s AWS has announced its Blockchain as a Service (BaaS).

Both Microsoft and Amazon supports a rapidly growing number of distributed ledger technologies that address specific business and technical requirements for security, performance and operational processes. BaaS provides a rapid, low-cost, low-risk, fail-fast platform to enable organisations to collaborate together by experimenting with new business processes; backed by cloud platforms both of whom have large compliance portfolios in the industry.

What do CIOs need to understand in the new blockchain environment?

Gary Nuttall who heads the LMG Target Operating Model’s Blockchain innovation stream speaking at the ACORD Innovation Forum earlier this year said: “Is it possible that we are about to enter a future where a new protocol, a technology will belong to everyone but be owned by no one? The banking industry spends about $1 billion annually on work around the blockchain, they have spent a lot of money and I believe that insurance can piggy back on that and learn. We can become fast followers and exploit the second wave.”

So what exactly is blockchain. I will explain all in my next blog!