Blockchain faces uphill battle against insurers’ scepticism
Blockchain—distributed ledger technology (DLT)—is the latest ‘next big thing’ across all industries, but as it infiltrates the insurance industry it faces an uphill battle, Marek Kaszczyc, vice president and head of Poland operation at Xceedance, told Baden-Baden Today.
“Predictably, insurers are holding blockchain at more than arm’s length, and even investigation into or evaluation of the technology is limited right now,” he said.
Kaszczyc believes a likely cause of this scepticism is the relationship between blockchain and bitcoin and its definition as the foundation of cryptocurrency.
“As a result, many insurers view the use of blockchain as exclusively financial or ‘fintech’ in nature and therefore not necessarily related to the productivity gains of insurtech,” he continued.
Blockchain facilitates transactions between multiple stakeholders by centralising all important information on a shared ledger, or smart contract, which can be accessed via secure computers.
Kaszczyc suggested this is particularly useful for reinsurers who will no longer need to seek or chase information from insureds, with all premiums and other information available on the shared platforms.
In order for there to be wider adoption of blockchain across the industry, he believes that insurers must embrace a broader view of the technology beyond its financial characteristics.
In spite of this scepticism, more examples of blockchain use are emerging and insurers are starting to pay more attention.
It is widely assumed that blockchain will have a visible effect on the insurance industry within the next five years, according to a March 2017 McKinsey & Company report, and 22 percent of the total use-cases have come from the insurance industry.
“For individual insurance companies, back office operations can be particularly impacted by improved efficiency and greater automation,” Kaszczyc said. “Using smart contracts, much of the menial and time-consuming work required for processing paperwork, validating claims, sharing data, and sending payments can be automated.”
He believes blockchain can help improve transactional transparency, increase data security, and reduce fraud, and that P&C insurers can also benefit from cost savings.
For example, fraudulent claims results in more than $80 billion in losses in the industry annually, according to a recent report from Deloitte.
Kaszczyc added: “Scams often occur when a single claim is filed multiple times with various insurance companies. Using traditional methods in which individual insurance companies store data separately (and often on paper), it is virtually impossible to cross-check the information for accuracy or to determine whether the same claim has been filed elsewhere.
“With smart contracts, a single claim is shared and then becomes available to all parties involved in the transaction. If additional attempts to upload the same claim are made, the system will not process them,” he concluded.
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