Legacy processes are at the heart of the insurance industry to ensure that every customer has a right: a secure and robust policy that gives peace of mind. These processes require incredible time and human effort, as large quantities of data from different sources are constantly to be monitored. Re-insurance, a business-to-business domain driven by economic diversification and risk management is an excellent example of a complex field in the insurance industry.
With the transfer to distributed ledger technology, each industry, including insurance, has been severely disrupted. Although a few industries feel the full power of disruption of the blockchain yet, this highly hypocritical technology has little doubt that the global economy could fundamentally shift. Indeed, the blockchain technology expenditures are projected to be more than double this year and reach $9.7 billion by 2021. Blockchain provides a precise calculation of reserves based on existing contracts. The technology also ensures that it addresses specific risk factors and thus boosts insurance companies’ confidence and leverages their daily operations.
With the aim of improving customer value, five German, Swiss and Netherlands insurers and reinsurers (Aegon, Allianz, Munich Re, Swiss Re, and Zurich) launched a project aimed at assessing the level of the blockchain technology in the industry. It was called the blockchain insurance industry initiative (B3i) initiative. Several months after the B3i launch, another ten European, U.S., and Japanese insurers and reinsurers have joined. It aims at exploring the possibilities for the distributed ledger technologies, exchanging insights into the blockchain, and other distributed ledger technologies, developing joint concepts and standards evidence, and testing the commercial value of a business for industry and policyholders. The group decided to focus on reinsurance as part of the insurance supply chain is now dominated by paper contracts and is an entrepreneurial undertaking. Blockchain promises that they work with a smart digital contract to exclude inefficiencies in the paper process.
Despite the risk factors, it is quite evident that blockchain will be advantageous and widely applied in the industry soon as insurers become highly competitive and provide innovative services.