Insurance Industry Waits for Blockbuster from Blockchain
There is no question that blockchain technology offers obvious benefits to the world of insurance - savings in time and efficiency, better security, complete transactional transparency and the reduction of fraud are all major attractions that are driving the discussion. And there is no lack of support at the C-level – one-third of executives are considering adopting or are already using some form of blockchain technology and 13% of senior IT leaders say that they have a clear plan to use blockchain for their business (Risk Management Monitor, February 25, 2019).
A once-famous commercial asked, “Where’s the beef?” At the Insurance Canada Technology Conference last week attendees were asking for an answer. According to Louisa Bai, blockchain market leader for Deloitte Canada, the industry continues to lack a “killer app” that all stakeholders can agree on before moving forward with widespread adoption.
It has long been assumed blockchain is the ideal vehicle for evidencing proof of insurance. After all, a decentralized permission-based ledger would allow real-time verification of coverage. Seems a natural, right? The problem arises because developers have taken multiple incompatible paths up the mountain, each designing their own approach toward a common goal. And as consortiums such a B3i, RiskBlock, IBM/Marsh and others continue to promote their own standards the industry seems to be waiting for the inevitable shakeout.
Remember, the nice thing about standards is there are so many to choose from...
A glimmer of progress can be seen in the recent adoption of InsureTech startup R3’s Corda platform, whose technology appears to address concerns related to privacy and data segregation better than other strategies. With the addition of RiskBlock, R3 now counts all major insurance consortia as Corda users, including the Insurwave marine insurance platform created by EY and Maersk as well as regional initiatives in India and Italy. If Corda is adopted by B3i, the European consortium of reinsurers, it could potentially cement R3’s solution as the front runner going forward.
So, where are we heading in terms of solutions? The grand notion of using blockchain for proof of insurance has become granular in focus with the goal of weeding out uninsured motorists. Other areas of burgeoning agreement include First Notice of Loss, subrogation and parametric insurance.
Nevertheless, interoperability is a critical requirement and seemingly self-negating. It will take considerable cooperation, fueled by solid proof the technology addresses all the security and privacy concerns of the major carriers before widespread adoption will take place. Of course, everyone will wait for the other guy to break the ice, take the risk and bear the expense.
It’s going to be a slog, but likely an inevitable one, however messy.
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