Distributed ledger technology will drive down costs: B3i

B3i wants to build a generic system for the insurance industry, and let insurers and brokers build their own proprietary systems that plug into it.

John Carolin, chief executive officer at B3i Services, believes distributed ledger technology (DLT) can radically transform the insurance industry, although he warned that the benefits would come incrementally, not as a sudden revolution.

B3i is a technology company that is using DLT to build products for the insurance industry. It is launching its property catastrophe excess of loss reinsurance (CAT XOL) product on R3’s Corda Enterprise, which will be ready for use by the year-end renewals season. It is designed to use DLT to improve the execution of the risk transfer process.

Insurance is not an efficient industry, with around 15 percent of revenue eaten up by administration costs, Carolin said.

“Can you imagine a bank telling customers that 15 percent of their money was going to be used as an administration cost for doing business?” he asked.

“The insurance industry has got away with being inefficient for a long time,” he said.

“Insurers have coped with having combined ratios of 100 percent by making returns on their investment portfolios, but that is getting harder. That is driving them to look at how they can reduce costs.”

B3i wants to help them achieve that. DLT should allow the industry to codify and agree on business processes that are self-executing and decentralised, potentially delivering huge efficiency gains in policy administration.

“CAT XOL is a placement solution, but we don’t want to compete with brokers in the placement space—that is their business and it is where they specialise,” said Carolin.

“We want to master the contract data at the point at which it is agreed, on a common platform for the whole industry,” he added.

“We want to build a user interface that the whole industry can plug into with their own systems. We want to build what is generic in the insurance industry, so that every insurer and broker can plug into it with their own unique user interface systems.”

Carolin believes DLT can be analogous to security certificates in e-commerce.

“It would be impossible to buy things on the internet without security certificates. B3i and DLT can bring that same level of comfort to administration in the insurance industry,” he concluded.