Blockchain and its Implications for the Insurance Industry

• The global market for blockchain in insurance is expected to grow from $64.5 million in 2018 to $1.39 billion by 2023—a compound annual growth rate of 84.9 percent.

• In the Accenture Technology Vision 2019 survey, more than 80 percent of insurance executives reported that their organizations have adopted distributed ledger technology across one or more business units, or are piloting or planning to pilot the technology.

• The analysis of two use cases identified between $99 million and $277 million in annual savings for personal auto insurance carriers in the US alone by the third year of use.

How can blockchain benefit the insurance industry?

Providing a single source of truth allows friction in business processes to be drastically reduced, using solutions such as smart contracts to facilitate and automate DLT networks.

Data reconciliation is made easier, accuracy is improved, and time spent uncovering information is eliminated, allowing for transparency, efficiency gains and cost reductions throughout a value chain. What’s more, shared industry tasks and automation generate more seamless processes and lower total cycle times.

The aggregate improvements in speed and accuracy can also create more positive customer experiences. For example, shortening the claims cycle through improved efficiency could lead to higher customer satisfaction and retention, while faster and better access to data could enable smoother interaction between insurers and their customers. Reducing inefficiencies and costs throughout the value chain could, ultimately, even lead to lower premiums.

How can blockchain help insurers get the basics right?

Within insurance, the claims and finance functions are high-value areas where blockchain could be beneficial, especially when you look at processes that need ongoing reconciliation with external parties. Consider how often Company A has a claim against Company B resulting in the exchange of money, typically in the form of a paper check or an electronic transaction. That could be completely automated using blockchain.

Presently, many insurers are applying a smart contract alongside blockchain, which is triggered when well-defined terms and conditions are met. By setting up an insurance contract that pays out under these circumstances, an insurer can process transactions with no human intervention and greatly enhanced customer service.

In other words, blockchain can help deliver on the digital opportunities that insurers must get right. These opportunities aren’t glamorous but they’re important: as I’ve said before, get them right and you won’t win—but get them wrong and you will lose. Blockchain can help insurers deliver on some brilliant basics. For example:

• Streamlined subrogation

• A more transparent claims process

• Using shared loss histories to obtain data-driven insights on prospective customers for more sophisticated pricing

• Supporting more efficient payments between insurers and third parties, especially during the claims process

Finally, several reinsurers have successfully used blockchain to streamline previously complex, manual processes.