How Blockchain Will Impact Insurance in 2017 and Beyond

  • Bob Crozier, Associate Director of Edge at AIA Group

  • 29.08.2017 08:30 am
  • undisclosed

The global insurance industry is on the cusp of a technological revolution that will change how businesses operate. How will blockchain technology eventually transform the industry for the better?

Much has been said about the blockchain revolution in recent years. Some have claimed that it will be akin to the internet revolution a few decades ago.

But for insurers, it goes much deeper than that. In my view, it’s set to change how insurance companies operate at a fundamental level, and transform the way insurers and customers relate to each other in a new shared economy.

So what is blockchain technology?

It’s basically a shared online ledger record of transactions, an agreed and common version of the truth that different parties hold and engage with. 

Every change that’s made in the chain is recorded and must be agreed upon by everyone in the network. You can't go back and delete a transaction. Rather, you can amend it with a reversing transaction and then create a new one that everyone agrees on.

How blockchain will benefit insurers 

For insurance companies, blockchain makes the audit trail much clearer. We can see who has changed what and who has exchanged control of what data to whom. This allows us to create and maintain an accurate distributed ledger that is verified by the entire network.

Information is distributed to the people who need to see it, with the utmost protection of customer data. It also helps us to better detect claim duplication, reduce data error and identify fraud.

From an operational standpoint, we’re already seeing how blockchain can bring a new level of efficiency to our business. Take a process that consists of 200 different tasks. With blockchain, we’ll be tearing out 120 of those tasks. That’s not just eliminating a significant percentage of the process – it’s totally altering the way the process is carried out.

That's revolutionary in my book. And it has important knock-on effects for our customers.

How blockchain will benefit customers

At its most basic level, blockchain will help our agents serve our customers better. It will shorten the time for customers to get what they need, when they need it.

For instance, we’ll be able to better secure the identities of individuals. The current trend is towards increasing data protection, but blockchain will make the idea of self-sovereign identity possible.

This means that people can go to any insurer or bank with their trusted identity, and be assured that it has been attested to by the government, banks and other insurance companies. This will remove the need to go through all the regular checks every time you want to access financial services and give you almost instant access to your policy at your point of need.

In addition, by increasing the efficiency of operational process across our organisation and reducing the incidence of insurance fraud and claim duplication, I believe blockchain will ultimately lower the cost of insurance for our customers. It’ll also make insurance more accessible for the under-served, particularly in rapidly developing economies in Asia.

Greater collaboration needed in the path ahead

That said, blockchain requires a coordinated approach that embraces collaboration between insurance companies as well as a wide range of partners across other industries. This is still very much in the developmental phase.

Despite the enormous transformational benefits blockchain offers to insurers and customers, the truth is that it is not yet robust enough to use in customer-facing applications. However, I’m hopeful that this will change as insurers become increasingly open to putting our heads together to work out how to use it.

At AIA, we’ve been working on developing a series of use cases that we can share with the industry as proof of concept. For example, we’ve built one of the first personal accident contracts on Ethereum, a decentralised platform that runs applications on a custom-built blockchain.

Our colleagues in China have also tested sharing anonymous information within a network of seven insurers in Shanghai to build an industry use case that is relevant to their regulatory environment.

These efforts have allowed us to test and learn about blockchain at this early stage of development to really understand its fundamental principles and where and how we can apply it to our business.

It’s difficult to overstate the impact that blockchain will have on the insurance industry. I firmly believe it's a foundational technology that will completely alter our operational processes and allow us to better serve our customers.

This article originally appeared at: linkedIn

Other Blogs