IBM and insurance broker Marsh are developing a blockchain-based platform to maximize efficiency in insurance verification. ACORD Corporation and ISN will also be working in partnership with them.
The system will be built on IBM’s blockchain platform as well as the Hyperledger Fabric code.
Why a blockchain-based insurance platform?
A blockchain-based insurance platform can help in reducing time, errors and finally costs. Distributed ledgers have the ability to reform the global insurance industry by maximizing efficiency, giving legal certainty and instant access to documents and mitigating the issue of a single point of failure.
The distributed ledger will replace dated, manual, paper-based systems or digital systems by making the records irrefutable as well as having multiple copies stored. Removing the need for reconciliations and other tasks from a central authority will further reduce costs.
In a world where interactions are time sensitive, instant access to data will result in higher productivity, benefiting businesses. Blockchain will allow multiple participants to view, record and add up-to-date records that will provide more legal certainty due to their tamper-proof nature.
Proof of insurance via a distributed ledger with timestamped transactions will contribute further to increased integrity.
With a decentralized system, there will be no single point of failure. If one party was to have downtime or connectivity issues all data is recorded on the blockchain as transactions and can be revisited upon reconnection.
A permission-based system will allow participants to decide who joins the chain to view or add data. The system will normally consist of the broker, the insurer and the regulator.
How will the system work?
The broker will create a policy while actively mining to contribute to the verification of transactions. The insurer can then create multiple offers based on the statistics from the broker. The broker will then accept the offer and create the insurance policy.
Each interaction is verified and recorded on the blockchain providing transparency among all three parties as they can instantly view the offers or tamper-proof policy.
How quickly will systems change?
Insurance companies are often slow in modernizing its business processes. With a general lack of expertise and awareness around blockchain, companies are outsourcing their IT needs to other firms such as IBM. As blockchain becomes more mainstream and companies develop competitive edges, there will be a wider adoption of the technology.
Expertise in blockchain and security will have to grow to match the demand for new systems, while companies will have to collaborate in order to migrate their interactions over to blockchain. With the current salary rising for blockchain developers, however, not all companies may be eager to migrate currently.