Blockchain and insurance: Real world applications
Remember back in the 1990s when everyone was talking about the World Wide Web and the information superhighway of the future? If you logged on via a modem (an adventure in its own right) the sites you found were cryptic looking pages full of code and primitive bit-mapped illustrations. It's laughable to travel down the memory hole to see some of the early endeavors - and a bit of a shock to know that was a mere 20 years ago. The entrepreneurial graveyard is filled with failed early adapters, but many early adapters are now among the most successful businesses on the planet. Many businesses stayed on the sidelines for years, thinking, "that isn't likely to affect me or, if it does, it will be so far down the line." One could be forgiven in those early days for failing to anticipate the way that the early Internet would rapidly evolve and impact virtually every facet of our lives.
Today, there is a comparable level of it-doesn't-affect-me skepticism about blockchain, or distributed ledger technology. Many dismiss it as either too complex or too far in the future to command their attention. Others mistakenly think it is only associated with Bitcoin.
We offered a brief blockchain introduction in a recent post, with simple video clips that explain things in plain language. But beyond the concept, is it being used in business? How is it likely to impact us?
Yes, it is likely to have a huge effect on business because it's a way to securely manage complex records in ways that are not contingent on proprietary or legacy systems. Some of the possible uses include ID verification; secure digital identities; digital voting; smart contracts; verification of authenticity; verification of ownership and management of healthcare records, to name but a few potential uses. In Forbes, Bernard Marr offers 35 real world examples of how blockchain is changing our world. Of his cited examples, Marr says that "While some may fail to live up to their promises, others could go on to become household names if blockchain proves itself to be as revolutionary as many are predicting."
What, specifically, is blockchain likely to be used for in the insurance industry? Really, if you think about it, it's game changing. Expect to see more and more early adapters throwing hats in the ring. One we noted recently was blockchain being used for proof of insurance:
"The Institutes’ work with insurers in the blockchain space has led to a debut product – a tool designed to establish proof of auto insurance. Nationwide is the first carrier to bring it to production and is already in testing mode.
Dubbed the RiskBlock Alliance, the industry-led consortium has named its first product RiskBlock, which they tout as a blockchain framework designed specifically for the risk management and insurance industry. Plans call for Nationwide to test RiskBlock with a small group of internal customers, with an eye on expanding it in the new year."
The Burnie Group, a Canadian management consulting firm, offers more examples in 3 blockchain-based use cases changing the future of insurance - we've offered a brief summary of their examples:
- Combating insurance fraud via digital provenance - "... opportunity to create an authoritative digital record or ‘fingerprint’ of real-world items and policies and claims. These unique digital records can be used to authenticate and track physical items of value throughout their entire life while making it extraordinarily difficult for criminals to defraud the system."
- Providing real-time insurance for the sharing economy - " ... on-demand, time-stamped and secure records of insurance without the need for a costly centralized “processor.”
- Using ‘smart contracts’ to enter new insurance markets - "Smart-contracts are programmable logic that self-execute once pre-determined conditions are met without the need for third-party intervention."
Blockchain isn't something in the future, it's happening now in its very early stages.
What can you do to prepare? Get it on your radar. Pay attention. Learn about the ways it might affect your agency and its operations. Learn about how it will affect your commercial clients. You need to be a topic expert to help them manage their emerging risk and exposures. Even though smaller businesses are often along for the ride with larger players driving the bus when it comes to new technologies, at Entrepreneur, Nikolai Kuznetsov talks about why blockchain should matter to small businesses.