5 Reasons why Blockchain is an Insurance no-brainer

Blockchain is (just) technology. On its own, it isn't much use and it certainly wont change a thing. However, when the technology is applied to a business process, then it gets interesting! Then, we can see a real use and a case for a material change.

This is why blockchain in insurance is one of two hot technology topics for 2017 (the other being AI). Along with many other InsurTech commentators, I wasn't alone with my 2017 predictions including blockchain, just as they did a year ago.

So, it's no coincidence that for the first issue of InsurTech Insights of 2017, The Digital Insurer looks at Blockchain in Insurance.

In this edition, I contribute a blog on the use cases in the wholesale and reinsurance markets. KPMG offer their POV for blockchain across all of the insurance space. Plus, there are a library of 19 other pieces of online content on the subject of blockchain and insurance. As always, The Digital Insurer is a must go-to source for quality content!

InsurTech is driving the rapid evolution of insurance and technology

One of the reasons why blockchain (as a tech) promises to be a game changer is that insurance (as an industry) has not kept pace. Over the past 2 decades (since the emergence of the Internet) insurance has not kept pace with technology.

And over the past decade (since the iPhone and the emergence of mobile), insurance has not kept pace with customers. Especially the digital savvy ones, regardless of age.

This is the context for why blockchain promises so much for all lines of insurance business. Here are my top 5 reasons why blockchain is going to make a difference to the insurance market.

#1 - Insurance costs too much

Too much premium is lost in the value chain through operational inefficiency in the form of multiple handoffs, manual processing and duplicated effort. This frictional cost of doing business is the opportunity that blockchain will exploit. PwC forecast operational savings of $5-10bn in reinsurance alone (although I personally believe it will be much greater).

#2- Insurance has forgotten it's a trust business

Despite public perception, the roots of this industry is trust. It's just that Insurers lost their way in the pursuit of large numbers and scale in the second half of the 20th century. They forgot about the customer on this two-way street of trust. But with the shift of digital agency back to customers, and the persistance of the P2P insurers, plus the promise of Lemonade, the issue of 'trust' (aka customer engagement) is #1 on the strategic agenda for insurers. And blockchain is a trust engine, after all!

#3 Insurance is too slow

At every stage along the value chain, from buying insurance to making a claim, the business of getting insurance takes too long. This latency in the trading processes is bad for customers. In the insurers pursuit of better understanding risk, the effort is pushed out to the customer to answer more and more questions. And when it comes to claims, the responsibility for proving honesty is with the customer. Blockchain promises to reduce transaction times and remove this settlement latency from the value chain.

#4 - Insurance is not transparent

Customers can not understand their insurance policy when the jargon is confusing and misleading. Some might say that is deliberate, I can't possibly comment! And it's worse in the wholesale markets. Multiple parties, manual operations, duplicate processes all lead to a lack of transparency in the insurance value-chain. It's the equivalent of the taxi firm telling you your cab is "on it's way sir". You have no way of knowing, but you just dont believe it! Enter Uber. And Blockchain for insurance.

#5 - Insurance is not immune from cyber

The single, biggest threat to all businesses in the digital economy comes from cyber attacks. And the attacks are on the rise, with denial of service on the verge of proving fatal to an unsuspecting enterprise. I was chatting recently with Steve Tunstall (CEO, blockchain startup Inzsure) on this very subject and he told me of reports in Asia where it is taking over 500 days before hacking is identified! Blockchain offers additional layers of defence as organisations look at strengthening their layers of resistance.

Rick Huckstep is an InsurTech thought leader, investor, advisor and speaker. Rick is Chairman, The Digital Insurer and strategic advisor to blockchain development house, ChainThat.