In my first post in this series, I set out the scene for blockchain’s growing relevance for personal lines P&C insurers. This time, I’ll examine how blockchain can bring new levels of efficiency into P&C insurance by embedding trust into transactions. This is an opportunity for an industry that has lagged in adoption of digital technology to fast-track digitization and begin reaping its rewards. Today, too many parts of the insurance value chain continue to depend heavily on manual processes. Manual processing and reconciliation mean that insurers’ cost bases remain needlessly high. What’s more, they result in unnecessary losses as a result of fraud and error, and create friction in the customer experience due to delays in processes such as renewals and claims pay-outs. Most manual processes exist because of a lack of trust between contracting parties. In the absence of end-to-end transaction transparency, the parties in an insurance contract or transaction depend on intermediaries such as brokers to create trust. This model is supplemented by the regulatory framework. Recording, verifying and tracking assets, records, and agreements depend heavily on human intervention. Because parties maintain different records and databases, updating them at different times, there is no golden record of the truth. There is no single standard in the market that promises to address this challenge, besides blockchain and the growing momentum it is building. Blockchain provides a consistent and uniform way for insurers to record and validate transactions, giving a single source of the truth that is updated in real- or near-real time. It uses cryptography and a distributed messaging protocol to create a distributed, or shared, ledger between transaction counterparties. This allows the parties to maintain comprehensive asset, contract and data ownership records without having physical possession or relying on paper or intermediaries. This, in turn, means that outcomes are more certain because there is less room for contract interpretation or information discontinuities. Furthermore, it can help accelerate claims settlement and reduce processing costs. And the auditability, immutability and security of the blockchain reduces space for fraud, error or disputes. Here are some basic uses cases we can see for blockchain in the P&C industry: This is just a start, however. My next post looks at how blockchain and smart contracts elevate automation by digitizing processes right across the P&C insurance value chain.
Blockchain could improve transparency in property and personal transactions by replacing manual databases ; recording , verifying , tracking and validating them in real - time , and providing a consistent and uniform process that minimises errors , according to May Knight , an insurance consultant at Accenture . providing a single referenceable source of data and records kept in customer digital wallets could also accelerate claims settlement and cut processing costs . " The auditability , immutability and security of the blockchain provides protection for fraud , error or disputes " , she said .