November 8, 2017 by Tessie Sanci, Associate Editor
Realistic applications of blockchain in insurance include a method of transferring information to insurer and broker technology systems and payments for simple claims.
These are two of the examples regarding how blockchain can transform the insurance industry as discussed by a panel at Insurance-Canada.ca’s InsurTech TO event in Toronto on Monday.
The examples that were presented at the conference came from a study project that took place this summer at the Cookhouse Lab, an InsurTech innovation lab in Toronto. The project focused on discovering the top use cases for blockchain and involved collaboration between multiple insurance stakeholders including Marsh Canada, The Co-operators and AIG.
David Lund, a panelist and regional manager of claims and operations for AIG Canada, described how blockchain could affect how insurers and brokers receive their information.
Blockchain involves a shared ledger that connects multiple parties and instantly distributes unalterable information. It could improve how quickly information is shared between insurance stakeholders and the accuracy of that data.
Regulators would input their notifications into the ledger and that information would be distributed instantly to the designated parties, such as insurers, said Lund.
“Each and every insurer out there, by example, would be able to read that data and immediately implement…anything to do with policy application, terms and conditions, and changes to legislation,” he explained.
The system’s advantages would include the ability to control who receives this data and the assurance that the information is accurate and inalterable. It would also help involved parties better manage their risk when it comes to regulatory compliance and could help in decreasing instances in which errors and omissions becomes a factor, according to Lund.
“There is one authoritative record versus each and every one of you being recipients to the information independently. The immutability is key,” he said. “In other words, by joining this community and being party to this, we’re also abiding by the fact that the data and everything that is contained in this is also 100% accurate.”
Another way to use blockchain in insurance would tackle “the biggest pain point” for insurance customers, which is the length of time it takes to have a claim paid out, said Natalie Whaley, another panelist and operations supervisor of accident and health consumer insurance for AIG Canada.
“[Claim fulfillment is] an arduous process between the insured and insurers. It’s a very manual process…and it’s a painful process for everyone,” said Whaley. “It devalues the trust that the consumers have in the insurance companies.”
The use of blockchain in speeding up claims processing could easily be used in the payment of travel insurance, said Whaley.
A consumer could log onto a blockchain platform and buy a smart insurance contract that is connected to a flight database. In the example used by Whaley, the customer is buying insurance to cover the possibility that his flight is delayed and may prevent him from enjoying already paid-for activities at his vacation destination.
“While he is sitting in the airport, the flight is delayed. He doesn’t know this yet, it hasn’t shown up on the board yet but because the flight database has indicated that the flight has been delayed, he is automatically paid his agreed-upon insurance claim,” Whaley said, explaining the results of the hypothetical situation. “He has money in his bank account before he even knows he has to make a claim.”
The use of blockchain in this way “would improve [the levels of] trust that consumers have in insurance companies and I think it can revolutionize how we are perceived as insurers in the market and how consumers purchase insurance,” she added.
For one company, the scenario above isn’t hypothetical. Axa Insurance in Europe is already working on implementing this type of blockchain-connected solution for flight delays, noted Whaley.
This story was originally published by Canadian Insurance Top Broker.