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Breakthrough business cases for blockchain in personal lines P&C insurance

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Blockchain dominates financial services news headlines today with many of the world’s leading banks and capital market firms already beginning to investigate how the technology will transform their industries in the years to come. There’s also activity swirling in commercial insurance and reinsurance, where several high-profile proofs of concept are underway.

Insurers such as Allianz are exploring blockchain-based smart contracts for applications such as catastrophe swaps and bonds, for example. And Aegon, Allianz, Munich Re, Swiss Re and Zurich have launched the Blockchain Insurance Industry Initiative B3i, aiming to complete a proof of concept for inter-group retrocessions by the use of blockchain.

P&C insurers that focus on personal lines are currently lagging this trend, and may be missing out on some exciting opportunities to streamline existing business as well as create new business models. In this series of blog posts, I’ll look at why blockchain may hold the key to disruptive new business models that enable P&C insurers to thrive in the face of growing regulatory pressure, relentless technology change, high combined ratios and rapidly evolving customer demands.

The major benefit I see in blockchain is that it provides a new way of embedding trust into insurance transactions and contracts. Its immediate appeal lies in the fact that it could bring about dramatic improvements in efficiency and productivity for personal lines P&C insurers by enabling them to replace manual business processes in claims handling and payment, subrogation, and assessment with automated processes.

It can help insurers to deliver the sort of fast, seamless experiences today’s consumers expect from their service providers—particularly when it comes to moments of truth such as claims settlement. But in the longer term, blockchain will be the link that binds together powerful ecosystems that come to market with radically new, customer-centric products and business models.

It could lead to the disintermediation of insurers and reinsurers, allow insurers to more easily offer pay-as-you-go or just-in-time insurance products, and clear the way for reliable peer-to-peer exchanges or self-insurance product offerings. What makes blockchain particularly well suited to this purpose is that it is an open-source, low-friction technology that can provide an interface between various members of the ecosystem that all can trust and that all can deploy with relative ease.

P&C insurance carriers should start investigating business cases for blockchain, building blockchain skills, and conducting proofs of concept that help them to build an understanding of blockchain-powered business models and the value they bring. They should look at how they can draw other members of their value chain into their blockchain ecosystems—for example, car repair shops, Internet of Things providers powering the smart home and the connected car, assessors, reinsurers, and brokers or agents.

Though it is early days for blockchain, its potential is real and the first movers will gain a significant advantage in the market. In my next post in this series, I’ll look at how blockchain can provide a new building block for transparency in the P&C insurance sector; future posts will look at the potential of blockchain-based smart contracts and ecosystems to radically transform the industry.

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