Despite our increasingly digital world, insurance is still paper-dominated. Aegon's Global Chief Technology Officer, Mark Bloom, highlights that being free from paper is just one benefit of blockchain for the insurance sector.
Mark Bloom says blockchain will enable the insurance sector "to start with the key metrics in a digital shared ledger and turn that into a legal document". This may sound like a small change, but can have a "massive impact," he says.
With all parties using the same ledger that directly captures all the metrics of the transaction in a digital form, there is no more need to translate legal documents into metrics. "This greatly reduces the work and associated risks and needs for further manual reconciliations", he says.
Mark also sees an advantage with blockchain in recording, because every action "creates a virtually immutable record which ensures that the parties know exactly what is agreed, but also why and when the contract was approved and signed".
Single version of the truth
Mark adds that the time is right for insurers to agree on one single version of the truth. Value for customers can be partly lost due to complicated paper-based contracts, but Mark heralds an improved vision of the future – brought about through blockchain.
"With all parties using the same ledger that directly captures all the metrics of the transaction in digital form, there is no more need to translate legal documents into metrics. Next to efficiency gains, the additional benefit of blockchain is that every action creates a virtually immutable record which ensures that the parties know exactly what is agreed, but also by who and when the contract was approved and signed."
Blockchain, says Mark, could mean that data processing of premium and/or claims payments between insurers and reinsurers could take a matter of seconds instead of the months it can take today.
Less obvious benefits, he says, are that the shared platform means insurers will be "working with one standard, developing solid security requirements and a guaranteed protection of privacy for all stakeholders."
Currently, says Mark, the insurance sector has to cope with inefficiencies resulting from multiple versions of the truth. "Contracts are liable to different interpretations and it is not always clear what the status of a contract is. Working with blockchain in a shared ledger has the potential to create an unparalleled level of efficiency and contract certainty for the (re)insurance industry."
Aegon was one of five insurers and re-insurers from Germany, Switzerland and the Netherlands (Allianz, Munich Re, Swiss Re and Zurich) which initiated the Blockchain insurance industry in 2016. Earlier this year 10 other insurers joined the B3i. The initiative will explore the potential of blockchain to develop joint standards. Since its launch in October 2016, B3i has been joined by ten more insurers and re-insurers from Europe, the US and Japan.