Tuesday, 10 July 2018 22:08

Blockchain set to disrupt insurance industry: report

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Blockchain technololgy could turn the insurance industry on its head and, due to its auditability and reliability, is making it easier for insurers to offer higher quality, more efficient services with lower overheads and greater accuracy, according to a new report.

“Because they’re encrypted, blockchain transactions can provide greater protection against misrepresentation and fraud,” said Mark Hoppe, managing director, Australia and New Zealand, Atradius.

“It has great potential to improve service delivery through collaboration between multiple organisations.”

And Atradius says the rise of cryptocurrencies such as bitcoin means there has been increasing interest in blockchain.

Hoppe says blockchain can be used for any transfer of value, “allowing users to instantly record and validate transactions between parties without the need for third-party control – and has already shown proof-of-concept in a recent trade transaction involving the Commonwealth Bank, Wells Fargo and Brighann Cotton".

The example cited by Hoppe involved a consignment of cotton shipped from the US to China. Information previously held by one party was made available to both organisations at every stage of the process through the blockchain, including when the cotton left the warehouse, tracked as it moved through the various depots and customs, and arrival at the buyers warehouse.

The arrival of the cotton triggered the payment to be released by bitcoin.

Hoppe says that while this was only a proof of concept, it’s likely to be the way in which trade will evolve in the near future – and blockchain will have significant implications for all insurance providers, including for providers of trade credit insurance.

“Blockchain isn’t going to be widespread throughout the insurance industry immediately but savvy insurance providers are already investigating possible use cases.

“Insurance companies that haven’t yet started to investigate the potential for blockchain in their business need to act now or risk being followers rather than leaders.”

Atradius has identified the key changes it says are taking place in the blockchain era:

  •  Speed of transactions. Traditionally, inter-bank transfers required customers to wait until midnight to reconcile. When using blockchain technology, transactions can be completed in a matter of seconds.
  •  Data security. In a traditional database, the general rule is that the more people with access to the information, the less secure it becomes. However, due to the networked structure of blockchain, each participant represents another small copy of the data held within the blockchain. Against intuition and different to almost every other system, the more users within a given blockchain, generally the more secure it becomes.
  •  Information accessibility. If a centralised authority is taken offline, users may be unable to access their information. In a blockchain, this information is spread around all participants so, as long as not all of the participants in the network are taken offline, the information is still available.
  • Co-operation between organisations.
  • Blockchain lets participants use a common set of data that spans those using the network, which may include multiple organisations. For example, Atradius could share information more easily with brokers, regulators or customers looking at ratings for an organisation.
  • Automation. Blockchain uses automation, eliminating the need for tasks to be completed manually and often resulting in greater efficiency and accuracy.
  • Decentralisation leads to cost reduction. Blockchain significantly reduces the costs associated with maintaining IT systems. For example, organisations no longer need to service databases or a network that allows the exchange of information between businesses. Because of its decentralised structure, blockchain is inherently more redundant and disaster recovery-ready, resulting in much lower operating costs.

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Peter Dinham

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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