Blockchain

A few weeks ago, one of my vehicles were damaged and I’ve been going through the process of getting it assessed and repaired. Lately, I’ve been spending a lot of time writing about the “Game Changing” innovations that will transform many areas within the Insurance Industry. One of the innovations I’ve been diving into is Blockchain, and its potential to increasingly enhance the Insurance value chain. When my vehicle was damaged, I immediately wondered how the process could be made more efficient if Blockchain were leveraged. I am by no means a Blockchain expert, but once I understood the concept of the “digital distributed ledger”, I realized there is opportunity to enhance several areas within the current Insurance value chain, and likewise drive innovation of other technologies that can be leveraged by the Insurance Industry. I’ll be diving deeper into the topic on my Insurance Innovation Podcast, with Nick Gerhart, former Commissioner of the Iowa Division of Insurance, and current Chief Administrative Officer of Farm Bureau Financial.

There has been a lot of hype around how Blockchain will transform the Insurance Industry, but thus far, its application to the overall insurance value chain has been limited. I believe that carriers are still working to understand how to integrate a full stack capability, but once this is understood, the application to insurance will be transformational. The key to what makes Blockchain so compelling for insurance is the concept of the distributed ledger. Distributed ledgers are databases which are synchronized, replicated, and shared, and are spread across a multitude of geographies, sites, and organizations. Any participant within a specific point can access the information, and if changes are made, all participants are notified. There is no central administrator, and the information is public. The “record” of transactions are permanent, and the digital ledger as noted above acts to affirm the transaction. Given that the system requires reference to preceding “blocks” within the ledger, it becomes increasingly difficult to “hide” illicit behavior.

Understanding this makes it easy to appreciate that the opportunity created by leveraging this technology can have transformational implications to our industry. From fraud detection within claims transactions, to P2P Insurance, the application of Blockchain, once recognized, are only limited by our current understanding of what it can achieve. Because the transparency of the public ledger across multiple participants is a key consequence of this technology, the transactions can be objectively verified through an assessment of the complete record.

When our car was hit by a driver in the parking lot of a central MA mall, a claim was processed. The adjuster assessed the damage, emailed me the estimate, and mailed me a check. I then had to physically take the estimate (on the Insurers letterhead) to the auto body repair shop. That shop reassessed the damage, and worked across several suppliers to obtain the parts to repair the vehicle. Once completed, I then wrote a check (based on the funds received from insurance provider) to the auto body shop who also requested additional funds from my insurer since the work and cost was over the estimate, and parts had to be special ordered. The adjuster had to physically visit the shop, reassess the damage based on what the body shop indicated, and approve the additional work.

Now imagine a scenario where Blockchain was used to drive this process. My insurer could be able to identify potential duplicate transactions for the parts, and each party within the repair chain can quickly update the “ledger” with information for things like the police reports, third party statements, increased repair costs, updates to the assessment, and quickly weed out inefficiencies within the current hybrid paper based/electronic process. With contract provisions, and parts availability being immediately verified as they are included within the ledger, payment for services can be made immediately instead of sending a paper based check, which I then had to send off to the body shop. I by no means listed all of the efficiencies that can be gained, but the transparency in this type of a model becomes customer centric, and can speed up the process to fix the vehicle, not to mention limiting fraud through verifying coverage and third-party information within the process.

This is just one basic use case that I’ve been contemplating, and I know applying the technology is easier said than done. A lot has to happen in order to make this work effectively. There are many use cases that can be identified such as with Surety Insurance, reinsurance, back office record keeping and regulatory auditing just to name a few. I’ll be diving deep into the benefit of Blockchain for Insurance on the Insurance Innovators Unscripted Podcast.  For more on my thoughts on the industry, click “follow”.  To hear my upcoming discussion on Blockchain with Nick Gerhart, or to listen to innovators like Daniel Schreiber, Tim Attia, Matteo Carbone, Sabine Vanderlinden, and other Insurance Executives, Thought Leaders and Influencers, subscribe to my podcast here.

#Educate #Inspire #Innovate

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