Blockchain is a Tagging System Designed to Prove the Time, Integrity, and Identity of Data
Publisher's “Blockchain: An Emerging Digital Platform for Insurers” provides an in-depth analysis of blockchain technology and its potential application to the insurance industry. The report discusses how blockchain could revolutionize many of the long-standing systems and processes within general insurance, and how insurers could benefit from the characteristics offered by the tech. The brief also provides an overview of the limitations of blockchain and the challenges insurers are likely to face going forward.
A blockchain is a distributed register to store static records and/or dynamic transaction data without central coordination by using a consensus-based mechanism to check the validity of all transactions. As the backbone to the digital currency bitcoin, blockchain was the first-ever solution to the double-spending problem that does not require a central administrator or some form of clearing agent. It is thus best suited for applications requiring transparency on records with a permanent time and date stamp, such as titles, document histories, and notary services.
Critical success factors
- Patience is key - Blockchain technology is at an embryonic stage. Still finding its way, and yet to prove it is a viable and industrial strength, insurers should remain cautious and ensure they are fully versed and prepared before implementing a blockchain-based system.
- Smart contracts is an area to explore - The notion of automating the insurance policy once it is written into a smart contract is compelling, and one insurers should embrace. The idea that a policy will pay out against the insurable event without the policy holder having to a make a claim or the insurer having to administer the claim has significant attractions. Firstly, the cost of claims processing goes away, and second, the opportunity for fraud is significantly reduced.
- Greater mitigation of cyber risk - With the blockchain sitting outside the corporate firewall, and managed by many different and unconnected parties, the cyber-criminal no longer has a single target to attack. Insurers could tie-in cyber products with blockchain, thus subjecting their businesses to a reduced level of risk, while the insured party would essentially require a lesser amount of coverage.