Blockchain technology has the potential to impact nearly every industry involving money.
One area in which we’ve seen innovation break through recently may come as a surprise: insurance. If there was any industry that could be viewed as the definition of mundane and stuck in its ways, it would be insurance.
However, earlier this week, we reported on a virtual insurance agent company partnering up with Facebook to offer quote comparison shopping via the social media giant’s Messenger chatbot. It’s safe to say the insurance industry world is slowly moving out of its stodginess and into innovation with this news — and the recent PricewaterhouseCoopers (PwC) announcement of its automated blockchain prototype for the London Market Target Operating Model (TOM) Innovation Exchange.
The TOM Innovation Exchange is a project using blockchain technology to specifically make the insurance claims process more streamlined, through automating claim creation, supporting documents and invoice creation, alongside approval or rejection of invoices. This gives those insurance companies involved in the trial the ability to communicate more effectively via blockchain technology’s ability to automate these pertinent aspects of the insurance process.
To help better understand blockchain technology and how it is impacting the insurance industry, we sat down with global innovation platform Plug and Play’s Principal and Director of InsurTech, Ali Safavi, and its Founder and VP, Scott Robinson.
PYMNTS: What are the benefits of implementing blockchain technology, and how is it impacting the insurance industry?
AS: There are a host of benefits for insurers to switch to smart contracts and digital currencies. There can be added transparency, less need for centralized operations and can help build upon microinsurance products (more cost-efficient operations).
PYMNTS: How does blockchain technology move the ball for insurance claims?
AS: Parametric insurance products like catastrophe insurance could be empowered more with the use of smart contracts. Parametric insurance simplifies the claims process for many products with the growth of IoT devices becoming even more prevalent.
PYMNTS: With Gartner predicting approximately 21 billion connected devices by 2021, the integration of real-time access to data in the insurance industry will likely be increasingly important to carriers. How would blockchain technology benefit the settling of future insurance disputes?
AS: IoT devices can lead to better assessment of damage that can potentially result in faster claims. Considering the growth of parametric insurance, IoT devices can result in more ways of creating triggers to automatically settle claims. Companies like RiskBazaar are investigating different ways of facilitating smart contracts for the transfer of risk. For the claim to be settled, there is a need for a moderator/trigger to verify the trigger, and IoT devices can play a big role for many products.
PYMNTS: How likely is it that insurance companies will update [their] underwriting and policy structures if blockchain technology moves into the market? What partnerships would need to happen in order to move forward?
AS: DLTs can definitely provide a lot of value to the industry. Blockchain seems to be a good start. Some more immediate use cases of technology would be more on the tracking side and validating proof of existence on blockchain. Also, adapting digital currencies can allow new methods of transferring payments. Other applications would start with smaller products and eventually provide powerful [products], and, with the growth of technologies, can find their way into bigger insurance segments. At the same time, we might see a rise in startups [that] facilitate such technologies for the transfer of risk and start taking away pieces of the market.
PYMNTS: Following the SEC’s decision to reject the bitcoin ETF, how does this impact the advancement of blockchain technology both in the U.S. and globally? Is this a roadblock?
SR: I think this latest news is more of an indication of the disparity in understanding the technology and the business requirements relating to identity when it comes to traditional financial services use cases. There are already instruments in the market that enable investment into the domain through legacy (i.e. GBTC), but the reality is bitcoin wasn’t built to channel more middlemen, so I see this as less important overall. Across the numerous use cases, however, it is the financial services industry that is furthest along in engagements with blockchain solutions. Most of these relate to identity plus compliance (i.e. global watchlist solutions) to process tracking and settlement. Large projects include the Ethereum Consortium, Hyperledger — but the longer-term offerings range from settlement, asset tracking, product provenance and more.