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The growing role of blockchain in insurance

At a glance

  • As a founding member of B3i, Zurich is playing a central role in exploring how blockchain technology could be leveraged to transform the insurance industry
  • After an initial phase assessing and testing the technology’s potential, B3i has now reached the point where new platforms and applications are being developed
  • We discuss the progress that has been made, and the potential benefits for insurers, brokers and customers

Traditionally associated with cryptocurrency, blockchain is now playing an increasingly important role across a number of industry sectors – including insurance.

Blockchain technology refers to a virtually incorruptible distributed database, used to maintain a continuously expanding list of records or transactions – otherwise referred to as blocks.

The Blockchain Insurance Industry Initiative – ‘B3i’ – of which Zurich is a founding member, has been exploring the potential of blockchain since its formation in 2016. B3i is now incorporated as its own separate legal entity, owned by 16 shareholders from across the insurance industry.

Antony Elliott, Group Head of Business Transformation at Zurich and Chairman of the Board of B3i, says: “We realise that Zurich can’t transform the insurance industry on its own, and the distributed ledger that blockchain represents is only really useful if it is fully distributed across the industry, including customers, brokers, insurers, reinsurers, and capital markets.

Antonio Di Marzo, Product Owner Reinsurance and Commercial Insurance at B3i adds: “The focus of the first phase of B3i was to see if the value of blockchain was really there, and capable of delivering the standardisation, integration and automation we hoped. Trials with customers, insurers, reinsurers and brokers proved this potential value, which is why we have now moved into production of blockchain platforms and applications.”

How blockchain increases transparency and reduces admin

“At Zurich, we are looking at how we can become more efficient, more effective, and more customer-centric – blockchain can play an important role in this,” explains Antony.

A key ambition is for blockchain to deliver a shared and transparent record of industry-wide risk contract and claims information. A critical attribute is that it can permission which parties can access data as well as providing an incorruptible audit trail of changes.

One benefit could be to provide additional transparency and trustworthiness to facilitate automated claims-handling without the need for further assessment – such as resolving a straightforward travel insurance claim where certain conditions have been met, e.g. a flight being cancelled.

Importantly, blockchain also has the potential to streamline communications and transactions by allowing for automatic data transfers in seconds.

Automation and the storage of contracts and transactions on a shared ledger brings a number of other important benefits, not least a reduction in administration for brokers through automation of processes like policyholder identity verification and contract validity checking.

Importantly, the technology can also help reduce the chances of data duplication, errors, and subsequent disputes and delays. As Antonio explains: “Insurance works in waves, with heavy workloads concentrated on the weeks around renewal. Reducing manual processes and administration, where possible, allows brokers and insurers to focus on delivering value to their customers.”

Cyber security and fraud detection

Another exciting possibility for blockchain is its potential to assist in the creation of an incorruptible, international and cross-industry database that can be used to flag for possible signs of insurance fraud.

The database could be used to check information like claims history and police reports, alongside a range of other information required by brokers and insurers when dealing with contracts and claims. These contracts and claims could be recorded on the blockchain, ensuring that only valid claims are accepted.

Importantly, the distributed ledger technology is secure by design. Not only does this remove a central hub that could function as an obvious target for attack, any data in a block cannot be retroactively altered – ensuring consistent and transparent contracts.

Delivering long-term benefits across the insurance ecosystem

Longer term, blockchain could transform the way the whole industry works. Antony explains: “Today, the industry typically works in an old-fashioned way, with policies lasting 12 months and based on information collected in a submission three months before a policy starts. As the data available to insurers becomes much richer, blockchain can lay the foundations for something much more dynamic in the years to come.”

Importantly, blockchain has the potential to support brokers across the industry. As Antonio sees it: “The infrastructure we are developing will be accessible to all the market players, regardless of their size. We are working on a pay-as-you-go model to ensure the network and platform can be neutral and accessible with no barriers. This will become an appealing opportunity for smaller players to make use of a top-notch technology at an affordable price, and for the bigger users to benefit from the efficiency gains at scale.”

Antony concludes: “B3i is not just building a narrow product, we’re building a platform. The first B3i reinsurance product and the first version of the platform will be launched later this year, with a commercial insurance product set to follow in 2020. Following these lighthouse products, the B3i platform will allow partner and industry participants to build their own applications.”

For more information on the issues discussed in this article, please get in touch with your local Zurich contact.

How does blockchain technology work?

Blockchain exists as a shared and continuously updated database replicated across a number of locations, rather than on any one server.

Not only does this remove any single point of failure and control, it also means that records are almost incorruptible and that entries and changes are explainable and traceable.

Image © Getty

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