Michael Mainelli and Bernard Manson from Z/Yen Group Limited have analyzed on behalf of Long Finance the potential impact of Blockchain on the wholesale insurance industry.
The goal of this study was to review the wholesale insurance market in order to understand major business processes, to identify where there are perceived problems or inefficiencies, and to analyse here the new technology of blockchain can provide part of a solution.
This study aims to contribute to building a consensus across the industry by involving a wide range of market participants though interviews and a project workshop. This included direct industry entities such as brokers, underwriters, insurers, reinsurers, and specialists such as mutual insurers, and supporting organisations such as trade bodies, regulators, standard setters, and wholesale markets such as Lloyd’s.
The purpose of the study is to identify practical uses for blockchain technology in wholesale insurance. Practical means having high value to individual firms and relatively low barriers to implementation, without requiring widespread industry consensus or regulatory change.
The authors have compiled several potential use cases for Blockchain and shortlisted them on basis of their “Benefit to Business” and “Barrier to Implementation”.
Blockchain technology is high on the agenda of global insurers and reinsurers, with many of them investing in trials; in our research, smaller organisations also expressed a great deal of awareness and interest.
Most of the interviewees were aware of the key capabilities of blockchain technology: tamper-proof record keeping, the replacement of a central authority with decentralised processes, and the potential for ‘smart contracts’ – essentially computer code which executes in response to an appropriate trigger.
None of the use cases identified in this report explicitly use smart contracts, although the next stage of analysing more detailed functionality may well include smart contracts to execute processing.
Most of the discussions with respondents focused on the major business processes between participants in the wholesale insurance market:
- placement of insurance (client to broker to underwriter/insurer);
- reinsurance (underwriter/insurer to reinsurer);
- claims management;
- accounting & settlement;
- KYC/AML (viz., a variety of checking processes including Know-Your-Customer, Anti-Money-Laundering, sanctions screening, and determination of ultimate beneficial ownership).
The report was sponsored by PWC.
The report is available at PWC. Download PDF