Blockchain interacts with these trends in several key ways
Blockchain is a remarkable technology because of what it avoids. Because the information it contains is distributed between multiple participants on the chain – and changes in recorded information are simultaneously visible to all participants on the chain – it substantially cuts down on the paperwork and record-keeping involved in traditional transactions.
This means top-level efficiency savings. Not having to have a paper trail, and getting real-time access to asset information, can massively increase the efficiency of insurance operations and reduce the potential for fraud. This, in turn, naturally lowers the cost – for both the insurer and insured.
But there are other, more transformative implications of blockchain-enabled insurance. Not least, it promises to transform the role of insurance professionals. Rather than shouldering the administrative burden of signing and handling transactions, or negotiating between carriers and clients, brokers and underwriters can instead focus their attention on more value-adding roles, like limit-setting and risk management.
The move to blockchain-powered insurance can also have a direct impact on the logistics of the shipping industry. If asset data can be collected and shared across a blockchain network, in real time, it gives participants in shipping a much better view of how their assets are behaving – and, significantly, how they interact with insurance mechanisms.
For example, if a ship suffers damage to its assets in transit, this information could be automatically recorded by the blockchain, and a relevant insurance policy could pay out without the need for claims inspectors on the ground. For the shipping industry, where large amounts of capital can be tied in operations that, by their very nature, are geographically difficult-to-access, this could introduce significant value.
Or, if a ship is moving through jurisdictions or geographic zones (such as war zones or areas with a high risk of weather events), insurance policies in place could automatically modify to reflect this shifting context.
Better ways of tracking and measuring risk may also help in breaking down long-standing silos in the insurance industry. The marine insurance industry has evolved over so many centuries that some products currently require several layers of brokerage to effectively connect buyers and underwriters. This should lead to streamlined services and better outcomes for buyers.
In short, blockchain-enabled insurance platforms could help bring capital and risk management closer together than ever before.
Turning the promise of blockchain into a reality
To this end, EY professionals have been working with Guardtime, Microsoft and Acord, along with key industry participants Maersk, Willis Towers Watson, AXA XL and MS Amlin to produce the world’s first maritime blockchain-backed insurance platform, Insurwave. Using a Keyless Signature Infrastructure (KSI) cryptographic data time stamping, Insurwave verifies data at the source – in ports, smart devices or any other point of data generation throughout the supply chain.
The system can then monitor this data in real time, preventing tampering and providing assurances of provenance to reassure all stakeholders, from regulators through owners, insurers and customers. And all of this can be done far more efficiently than traditional methods, reducing costs as well as increasing the potential for identifying new insights through more robust tracking of assets.
Ultimately, a blockchain-based insurance platform underpinning shipping could play a critical role in bringing the industry fully into the 21st century and help it address some of its most pressing challenges.
This article was developed in partnership with Guardtime’s David Piesse, Chairman of the International Insurance Society Ambassadors.