Securing the future and embodying trust: insurers put to the test with the blockchain revolution
Following "uberisation", now it's the "blockchain" that is shaking up the business world. Behind this curious word is a technological advance which, if certain commentators are to be believed, could lead to the potential extinction of traditional economic players like banks and notaries. Insurance companies might also be affected, but for the insurance sector, the blockchain should be considered a strong opportunity.
The blockchain – a secured, decentralised database without an intermediary, which stores exchanges and transactions while preventing tampering or revision – is being presented by some as a threat for a key player’s future in the economy: the trusted third-party that ensures that payments are made and confirms the legal existence of a contract. But there is no economy without trust. From this standpoint, "yesterday's" trusted third-parties will no longer have a place in a digital civilisation marked by the increasing acceleration of the disintermediation process and sharing logic. An insurer could be replaced by a mutually financed health insurance system between private individuals founded around peer-to-peer networking, and whose reliability and proper functioning would be ensured by the blockchain.
Past the disruption myths: blockchain as an opportunity
Whether we consider these projections to be prophecies of doom or contemporary myths it must be acknowledged that the blockchain is shuffling the deck for insurers insofar as it is questioning their role and their place in the value chain. But far from being a harbinger of death for insurance companies, this technology provides them with an opportunity to offer new added-value services to policyholders.
Smart contracts and simplification: blockchain for agile insurance
First and foremost, the blockchain should improve the price-quality ratio of services by cutting back costs and lightening operating methods. The most spectacular advancement made possible by the blockchain is undoubtedly the existence of "smart contracts", which automatically self-execute once defined clauses have been fulfilled by the parties. No need to go through tedious administrative processes anymore! The blockchain handles the entire process: verification of information conformity, processing of complaints, indemnifications, etc. For insurers, this promises large-scale simplification of standard and time-consuming tasks, reduced structural costs, limitation of fraud and, above all, refocusing on high added value services, which is the central challenge for all companies faced with the digital transition. By transferring the tasks threatened by commoditization to a blockchain, insurers will increase their agility and will then focus their efforts on moving their services upmarket.
Increased trust: blockchain for policyholders
Beyond the reduced costs, policyholders will be the main beneficiaries of this blockchain revolution if insurance companies use this technology as an additional risk guarantee mechanism. This is what the Allianz group has already set about doing by incubating English startup Everledger, which specialises in diamond protection. Diamonds are analysed and recorded in a vast ledger which memorises their characteristics and facilitates identification in the event of theft or counterfeiting. In the financial sphere, Allianz and the startup Nephila developed a natural catastrophe swap method using blockchain smart contract technology. This enables
an efficient and speedy "cat" swaps and bonds, which are decisive factors for the insurance sector in dealing with major catastrophes.
Consolidated value: the blockchain redefining insurers’ DNA
Prospects for innovation to improve the services provided to policyholders are plentiful, as well understood by the other insurance groups who have just launched the Blockchain insurance industry initiative (B3i) alongside Allianz. Future prospects include interconnection with the physical world (cars, houses), as is being done by startups like Ledger − which specialises in secure Bitcoin hardware wallets − and experiments for compensating the 60% of travellers that never request payouts for late flights.
It is still too soon to say with certainty whether Blockchain technology will completely or marginally transform the world of finance – and insurers need to consider this – but one thing is certain: the personalisation and transparency made possible by this innovation pave the way for a reinvention of services to better meet the expectations of increasingly demanding and connected clients, while reaffirming the DNA and fundamental mission of insurers of building an ever-stronger relationship of trust with policyholders.
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