The introduction of blockchain in insurance could turn the “legacy-led industry” on its head – if it can just get past its initial fears, says a UK premium finance firm.
While many are wary of the technology, blockchain could improve efficiency and is unlikely to edge anyone out of a job in the process, according to PremFina.
“At present, the majority of the discourse around blockchain in insurance is surrounding its security and its assumed ability to put members of the insurance community out of work,” Natalia Zurowski, PremFina told Insurance Business.
“This has created an understandable air of fear amongst those in the industry, specifically at the top of their respective sectors: leading brokers, insurers, and underwriters. The fear stemming from what they perceive would be a loss of control, resulting from the ‘decentralised’ nature of blockchain, and the fear of being replaced by the technology.”
According to the firm, while some of the fears and insecurities held by the industry are “somewhat valid,” the fear of blockchain lies largely in misunderstandings.
“The implementation of blockchain is unlikely to remove anyone from the insurance industry chain. The goal and purpose of blockchain, quite simply, is to make existing processes more efficient,” Zurowski said.
While it is commonly known that blockchains can be either public or private, many do not understand that blockchains can also be permissioned or unpermissioned – an important aspect in the context of its application to the insurance industry.
“In the insurance industry, permissioned blockchains would be the preferred option: a central authority would be in charge, and each member would also be aware of the identity of others on the system. This is a much better fit for the present control structures of large insurers and brokers,” Zurowski explained.
However, she stressed that the market must be aware that the technology cannot and will not be implemented overnight.
“Any changes made to existing processes within the industry, as a result of blockchain, will begin at the ‘process level’. Independently of each other, small groups will work to fix certain problems in the industry, before combining their efforts to solve issues at an industrial scale,” Zurowski said.
“Therefore, this is a call to arms to those who are interested in adopting blockchain technology. If a member of the insurance industry chooses to become an active participant in the blockchain process, they can help contribute to the development of good standards.
“Through collaborative efforts, their initiatives can then lead to market-level change and adoption. They can then learn what works, and what does not, and begin to suggest solutions and technologies that are most satisfactory for all. Members in the industry do not need to fear blockchain. If they choose to embrace it now, they will be getting in on the ground floor.”