Collaboration vs. competition Unlocking the power of blockchain in insurance The global rising trend of digitalization and the sharing economy have progressively put the heat on insurers to rethink their business strategy by leveraging more disruptive technologies, collaborations across the eco-system and more innovative partnership models. Across Asia, and particularly in China and Hong Kong, the insurance industry is experiencing an unprecedented degree of change. Insurers who can embrace emerging technology, such as blockchain, to enhance their company efficiency and develop new ways of doing business for better synergy and value maximization - while staying on top of all the compliance requirements - could be the future winners. Insights December 2017 Collaboration vs. competition Unlocking the power of blockchain in insurance 2 Blockchain, the technology underlying the cryptocurrency bitcoin, is a distributed ledger where multiple parties can see and add information transparently and securely. It is "distributed" in nature in that identical copies of the blockchain are kept on multiple computers owned by different entitles. Data is exchanged, verified, and stored in fixed structures called blocks, and each copy of the blockchain independently validates new blocks before adding them to the chain. Also, blockchain has a unique function of independently verifying information. Given its ambitious potential to drive simplicity and efficiency through the establishment of new financial services infrastructure and processes, blockchain technology, which is more properly called Distributed Ledger Technology (DLT), is rapidly gathering momentum within the insurance industry in the global marketplace today. Insurers, like banks and other financial institutions, are intermediaries and, at first glance, there is great potential for insurers to use blockchain technology to: • improve customer experience; • streamline payments of claims; • reduce costs; • manage risks by detecting, preventing and countering frauds; and • bolster the bottom line. In addition, blockchain technologies could support the significant digital transformation underway in the industry because much of this transformation relies on data. Smart contracts, another feature powered by blockchain, could provide customers and insurers with the means to manage claims in a transparent, responsive and irrefutable manner. Contracts and claims could be recorded onto a blockchain and validated by the network, ensuring only valid claims are paid. For example, the blockchain would reject multiple claims for one accident because the network would know that a claim had already been made. Also, smart contracts would enforce the claims – for instance, triggering payments automatically when certain conditions are met and validated. Deloitte believes this is one of the most promising technologies to take the next step in creating the digital enterprise. For property and casualty insurance, underwriting and claims processing are the dominant functions and processes. With underwriting, we have seen that blockchain technology can help reduce costs, improve risk assessment, improve accuracy of pricing, and enhance client onboarding. Similarly, the technology can simplify and automate claims submission processes to reduce fraud loss, improve customer experience without manual inspection, and facilitate automated compliance. "We believe blockchain is one of the most promising technologies to take the next step in creating the digital enterprise. For property and casualty insurance, underwriting and claims processing are the dominant functions and processes. With underwriting, we have seen that the blockchain technology can help reduce costs, improve risk assessment, improve accuracy of pricing, and enhance client onboarding. Similarly, the technology can simplify and automate claims submission processes to reduce fraud loss, improve customer experience without manual inspection, and facilitate automated compliance." Deloitte Consulting Collaboration vs. competition Unlocking the power of blockchain in insurance 3 Figure 1: What is Blockchain? Source: Deloitte China Global market experience Deloitte's Center for Health Solutions and Center for Financial Services recently partnered on a research project to look into how health and life insurers might leverage blockchain and related technologies to strengthen key elements of an insurer's value proposition in the next five to 10 years to improve current operating processes and systems while enhancing the customer experience and reducing costs. This covers a wide spectrum of the insurance value chain: • from policy applications to policy servicing and administration; • from underwriting to alternative payments models; • from claims management to fraud mitigation; and • from cyber security to data privacy. Within the study, Deloitte proposes operational and consumer use cases to examine how blockchain could directly and indire...
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