The promise of blockchain

As insurers begin to take advantage of partner services in the cloud and what has been called the API economy — a cloud-based ecosystem of provider services — they face information security challenges on a different order of magnitude than traditional hacking. Blockchain — distributed ledger technology that ensures secure transactions between parties — is poised to play a crucial role in making safe this new world of integration in which automated transactions are executed across coordinated multiparty interactions.

However, the security aspect of blockchain is just the foundation of its greater promise: to inject huge efficiencies into business processing. That’s because the automated transactions it can enable will occur in real time on a massive scale, replacing thousands of manual processes that are labor-intensive, slow and subject to human error.

Insurers have traditionally been involved in multiparty transactions of various kinds, for example in commercial insurance underwriting, reinsurance and claims processing. Blockchain can introduce tremendous new efficiencies into these processes and also power others, such as:

• Title insurance transactions
• Smart contracts for insurance processing
• Peer-to-peer insurance
• Microinsurance
• Internet-of-things self-insurance

The potential impact of blockchain will depend on the degree of adoption across the industry. Boston Consulting Group estimates that the technology could help the property and casualty industry reduce its combined operating ratio by 5 to 13 percentage points and generate $200 billion more in technical margin from its current gross written premiums. Insurance leaders will pilot small blockchain initiatives and expand them in areas where they can achieve the greatest efficiencies.

Continue reading the position paper, Reimagine insurance by engaging customers in a digital age.