Blockchain could 'revolutionize' insurance
HOUSTON — Efforts by insurers to implement blockchain technology could create significant efficiencies in the insurance purchasing and claims processes, a panel of experts said.
Blockchain technology, which is a decentralized peer-to-peer network, could ultimately lead to faster claims payments and cheaper coverage, they said.
However, the technology, which allows users to centralize private information and log transactions in a secure environment, is still in its infancy, and the regulatory environment for transactions using blockchain is underdeveloped, they said
“Blockchain has the potential to revolutionize underwriting,” said Dale Sherman, vice president of claims at Allstate Insurance Co. in Northbrook, Illinois.
He was speaking Friday during a panel discussion at the Claims and Litigation Management Alliance’s annual conference in Houston. CLM is a sister organization of Business Insurance.
In auto insurance, for example, by accessing policyholder information — including financial, health and credit information — in a secure location, insurers will be able to offer more personalized coverage, he said.
“Coverage could be just-in-time or on-demand. You can imagine mile-by-mile insurance for a specific individual based on their very specific, idiosyncratic risk profile that would change in value, and there could be a bidding marketplace. Blockchain could enable that in real time depending on where they are going,” Mr. Sherman said.
Blockchain could create significant cost savings for commercial insurers, too, said Tara Acton, Denver-based director of claims and senior corporate counsel at telecommunications firm CenturyLink Inc.
Efforts in the insurance and reinsurance sector to test blockchain transactions for catastrophe losses, if successful, could reduce costs and make transactions more efficient, she said.
“The ability to process those large catastrophic losses with one proof of loss that’s shared amongst everyone … we could dramatically reduce the administrative costs and friction for insureds in that space,” she said
Ultimately, the increased efficiencies should lower the cost of insurance, Ms. Acton said.
And commercial claims could be simplified if blockchain is used by companies outside of the insurance industry to track products and components via shared ledgers, she said.
In product recall cases, for example, grocery stores could trace individual food products more easily, Ms. Acton said.
While blockchain, particularly its use as a technology to enable financial transactions using cryptocurrencies such as bitcoin, has great potential for insurers and other industries, the regulations governing the transactions have not been fully developed, said Lance Ewing, executive vice president of global risk management and client services at Cotton Holdings Inc. in a Katy, Texas.
The insurance industry is founded on regulations, he said. “We stay in our swim lanes for the most part, but there is no swim lane right now. It’s an unregulated Wild West in some places.”
In addition, blockchain development requires insurers to share information, which they have been reluctant to do in the past, Mr. Ewing said. “There’s an opportunity for carriers to do what’s best for the policyholders,” he said.