Executives skeptical of the hype should recognize how blockchain’s enablement of increased trust and transparency speaks to the heart of the insurance business.
The three-step path to adoption and maturation
After identifying high-impact areas for blockchain technology, insurance companies should begin testing and proving out new models.
We see a fairly clear path forward in this regard, starting with low-risk, internal prototypes and pilots in the short term, later expanding to broader deployments involving partners and third-party networks. As with firms in other industries, the adoption curve for P&C insurers involves evolution from internally focused projects to customer-facing ones and, ultimately, to widespread adoption enabled by the IoT.
Internal proofs of concept
For many insurers, a simple, internally focused use case will be the right place to start. Internal reconciliation of customer data sets and internal claims processing with smart contracts are two likely candidates for experimentation.
The opportunity to streamline internal processes, such as monthly closes, may also be attractive. By choosing narrow scope projects to address internal business gaps in the short term, you position your organization with the right insights and strategies to appropriately address the larger opportunities and business issues down the road.
Customer-facing processes
As the technology progresses and internally deployed solutions verify the viability and functionality of blockchain solutions, insurers will next turn to implementations that support customer-facing applications. Ideally, you can deploy strategically in an ecosystem where your enterprise is a market maker, which provides leverage to drive adoption.
Distribution networks or well defined partnerships will also be candidates for first-generation blockchain deployments. One important step here is to develop the requisite legal, regulatory and tax frameworks to shape the development of the technology architecture.
IoT enablement
The long game for P&C insurers is to integrate blockchain deployments with hardware and software components that allow for communication among devices and transmission of external data streams. The intersection of big data, IoT and blockchain is the most compelling long-term value proposition. Consider how sensor hardware can deliver near real-time information about the performance of an automobile via a blockchain mechanism, allowing insurers to adjust premiums through smart contracting software.
The blockchain bottom line: the time for experimentation is now.
In an era of “point innovations” such as mobile apps and robo-advice models, blockchain stands out as a more foundational or architectural development. In that sense, blockchain may support, and subsequently drive, increased use and broader adoption of the many other digital innovations that have helped reshape the P&C landscape.
Executives skeptical of the hype should recognize how blockchain’s enablement of increased trust and transparency speaks to the heart of the insurance business.
After all, the industry’s inherent bond of trust and “promise to pay” are based on disclosure of accurate personal data describing the insurable interests of the client, the agreement to a contract between two parties and timely exchange of payment. Blockchain can help remove friction, errors and risks from all of these essential steps. There is substance behind the hype, but the insurance industry must make investments now to be in a position to take advantage of efficiencies and opportunities blockchain technology can deliver long term.
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Blockchain has the potential to evolve into a core, underlying element in the technology “stacks” of most P&C carriers, supporting a diverse range of processes and part of an insurance company’s future technology “plumbing.”