Analysing the development of blockchain in the insurance sector
When blockchain technology was first created by a small group of individuals, many banking systems stated they would never use it. That was partly due to the reputation the technology had of being used by anarchists looking to avoid using banking systems, according to head of delivery for ConsenSys, Julien Vincent (pictured), when he spoke recently with Insurance Business. Since then, it has progressed to the point that the banking sector has realised that it makes sense to invest and utilise blockchain, he said, and in 2019 the financial sector as a whole started to invest heavily in these solutions.
Read more: Aon’s latest report examines the “true potential” of blockchain for insurers
Vincent, who manages the delivery of ConsenSys projects worldwide, as well as the implementation of major blockchain programs for ConsenSys’s global customers, has led digital transformation projects for several international consulting firms and outlined that technological revolutions will always occur – it is only a matter of whether businesses are ahead or behind the curve. It is difficult to say whether or not the insurance sector is late to the table when it comes to blockchain, he said. Though the sector is lingering behind other financial services who already have substantially sized projects in production, he said, in many ways, the solution has not been fully ready for the insurance industry until now.
Up until recently, ConsenSys was carrying out proof of concepts within the insurance sector to show that the use case was working, but these projects were not going into production, Vincent said. In 2020, the value of projects began to rise from being under €500,000 to being valued between €500,000 and €2 million.
“The insurance sector is investing more in blockchain, especially this year and next year, and I think this is the right time for that investment,” he said. “It’s becoming much more important in terms of investment and most of these projects are centred around bringing efficiency to the actual use case.”
Blockchain has several significant benefits to carriers, Vincent noted, among them the capacity to save them time, cut costs, improve transparency, assist them in complying with regulations, and helping them to build better products and markets. From his own work with insurers, he has noted that the key benefit offered by blockchain that insurance companies are interested in is its capacity to bring efficiency and reduce the cost of processes.
“Most large corporations are ready to invest one euro if they can save one euro in return,” he said, but he highlighted that for some organisations blockchain has become something of a buzzword without any real understanding of exactly what this means for the business. “Sometimes clients come in and want to utilise blockchain, but at the end of the audit, they don’t need this, they just need to modernise their IT systems and there is no point in implementing blockchain unnecessarily.”
Blockchain has the capacity to maximise operational efficiencies for brokers, Vincent said, particularly when it comes to the opportunities afforded by this for simplifying communication between brokers and insurers. Taking a KYC (know your customer) check for example, he said – if the KYC of one broker is validated, then, when another insurer is reached out to, this must be redone.
As seen in other areas of financial services already once the KYC is validated it can be published into the blockchain with the trust of the company validating this check. Then, when a new client comes along, the KYC has already been validated by one or several companies and can be trusted, thus preventing the need for brokers to redo the entire process.
There is a lot of discussion about insurers and brokers adapting to new technologies and the problem of legacy systems preventing transformation, but Vincent noted how quickly transformation can take root within the employees of an organisation, and prompt significant changes in the way that businesses carry out their processes. Looking to the coronavirus (COVID-19) outbreak and how it is forcing people to understand how to work remotely is one example of this, he said. He highlighted how a strike in France precipitated the use of public transport and how, when the strike was over, people continued cycling to work.
“I think that COVID-19 will do exactly the same,” he said. “You can see that most are now working remotely, and with Zoom, and lots of people will start saying ‘why do you have this information on paper, why is it not in a database?’. They will ask why they cannot access information immediately and why they have to wait. And this will push companies to innovate and allow employees to access information right now, wherever they are.”