While Bitcoin has remained on the fringe of finance, the technology behind the cryptocurrency has the potential to forever the change the insurance industry.
New research from Long Finance, sponsored by PwC and conducted by Z/Yen, found there is a significant amount of enthusiasm among the wholesale insurance market about creating a blockchain solution for monitoring transactions.
It’s a significant finding since blockchain technology has the potential to create a massive efficiency boost. Recent estimates from a Goldman Sachs Investment Research report found that use of blockchain in KYC/AML checks alone could save $2.5 billion of the estimated $10 billion global processing costs in the sector.
The use of a blockchain would essentially provide wholesale insurers a distributed record of transactions across the sector available to everyone. Speaking to Insurance Business UK,
Steve Webb, financial services blockchain leader at PwC, said while this would eliminate things like re-entering and duplicating data, it would also have far further-reaching benefits.
“There is a big efficiency play, but it’s not simply de-duplication, it’s actually digitising, to a certain extent, the transaction flow between the broker, the insurer, the reinsurer and potentially the party seeking insurance,” said Webb. “And potentially others, like the market and the regulator.”
While the most immediate benefit comes from efficiency, in this future the blockchain could allow a far greater sharing of information between all parties involved in insurance. A potential application could be allowing insurers to track the exact moment an insured cargo container is loaded on to a ship, by connecting the blockchain with an internet-of-things system.
While the appetite among wholesale insurer is there, Webb said the challenge is now establishing cross-company standards to create the system.
“For everyone to get benefit from that, you have to agree between the broker, the insurer, the reinsurer, any market regulator that would want to be on the chain, on the way it is going to work,” he said. “You need to agree on the business process standards you are going to have.”
While it all may seem abstract for the average high-street broker, Webb said they could be using it in the near future. Like Bitcoin users, brokers are varied and need to manage complex transactions. Webb also said brokers will follow the standard the big insurers set.
“When some of the major insurers and players that high street brokers interact with start to change their processes and start to adopt this technology, the ripple down effect will be that they’ll want all parties they interact with to adopt it themselves,” he said.
Webb said experimenting to find what works is important for the development of blockchain.
“This is a new technology, its going so fast that building something with it, experimenting and looking to learn, adapt and move on we think is the winning way of developing solutions.”
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