Many startups and established business have highlighted insurance as an industry that can benefit greatly from distributed ledger technologies like blockchain. There's been a lot of movement in this space, with cryptocurrency startups like Icon (ICX) moving in, and the world's largest and most established insurance giants also racing towards it.
Now ANZ, Suncorp NZ and IBM are collaborating on another small corner of the insurance ecosystem – specifically, speeding up payments and the transmission of policy information between brokers and insurers.
"Reconciling policy information and premium payments made to a broker by an insurer on behalf of customers is a slow and painful process," explained ANZ NZ institutional managing director Paul Goodwin.
As an ANZ proof-of-concept whitepaper explains, the typical process for managing these customer-broker-insurance payments, and the sending of policy information, is remarkably strenuous.
When an insurer receives one of these payments from a broker, on behalf of the broker's client, it has to be matched to an individual policy. Unfortunately for insurers, brokers typically just make batched payments on behalf of their clients, which the insurer then needs to divide and match with the appropriate policies. This needs to be done at every stage of the policy life cycle, when a customer gets a quote, agrees to a policy, makes a premium payment and then at every renewal. The end result is a constant back-and-forth stream of payments and policy information, which needs to be constantly sorted, divided and organised in different ways.
This is compounded by the number of customers an insurer or broker has, the possibility of insurers and brokers holding different versions of the same policy and other problems.
"The blockchain solution will be much more efficient for the industry as well as being very secure. As a single 'source of truth' it will provide greater visibility throughout the process, remove uncertainty and help make response times faster. This technology will work with existing industry solutions to capture relevant information, ensuring payments can be forecast and made without the need for reconciliation."
"Distributed ledger technologies are driving major efficiencies across many industries by enabling previously complex, manual processes to operate in real time with full transparency," said Mike Smith, managing director at IBM New Zealand. "IBM used design-led thinking principles and practices to reinvent the business processes behind intermediated insurance at ANZ. The result is an interoperable network that could not only decrease policy costs and improve customer service, but also build a foundation for the introduction of other transformation technologies, such as artificial intelligence."
It's a very specific application, but it might also represent enormous savings for insurers that choose to use it. Reinsurers are noticing similar benefits in reconciling payments made to each other, and implementing blockchain solutions at every suitable level of the industry could lead to remarkable efficiency gains, especially compared to the remaining painful legacy practices.
The relatively competitive nature of the insurance space, and the ease by which these efficiencies can be directly passed onto consumers, means blockchain systems will almost certainly lead to noticeably lower insurance premiums for customers.
A Finder release || May 03, 2018 |||