Using Blockchain as the foundation for tomorrow’s insurance industry

Mark Walles, co-founder, Galileo Platforms

Could a blockchain platform deliver new markets, more agile products and large-scale cost efficiencies across the industry?

Commentators have identified the insurance industry as an ideal candidate for transformation by blockchain technology. Many blockchain InsurTech pilots are exploring alternatives for processes in the insurance value chain such as KYC and claims. But few have seriously explored the more fundamental potential of blockchain for the insurance industry and considered how it could improve a substantial part of the value chain by removing rework and driving efficiencies thus transforming the industry, including its operating model and cost structures and thereby opening up new market segments.

Insurers are struggling with digital

Growing digital channels and transforming insurance organisations are hampered by:

Complicated products: Clients struggle to understand product features while the ticket sizes and commitment durations are often intimidating. Products increasingly fail to meet client expectations and don’t suit new digital distribution channels.

Legacy systems: Monolithic systems obstruct personalization and require long product development cycles. Straight through processing remains the exception, not the norm.

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Limited customer service options: Insurers dictate which channels clients use for service while the omni-channel experience remains a dream and far from reality.

Limited digital options for customers: Digital support is sporadic across the customer journey.

This means Asian insurers struggle to find a model to cost-effectively expand their reach into Asia’s emerging middle class while a growing millennially-minded, digitally savvy demographic in mature markets are underserved.

Properties of a blockchain

Blockchain implementations have three fundamental qualities:

Trust: All parties know their view of the current state is true and devoid of fraud.

Transparency: Participants can be confident all counterparties have the same information.

Immutable: The content of the transactions that delivered the current state can never be changed. The code encased in a smart contract will endure for the transaction’s lifecycle.

To understand this potential let’s decompose the blockchain and understand the technology properties it brings to solving business problems:

Database: First and foremost a blockchain is a distributed database with each node maintaining its own copy with the confidence that their version is identical to the other parties and safe in the knowledge no one can change the history of transactions that have created the current state.

Codified services: Smart contracts enable code to be executed at various points in the lifecycle of a contract. The executable byte code is enshrined in the contract. The code reacts to the changes in state by executing each time the variables in the contract are updated.