Insurers find blockchain a tough nut to crack
There's no shortage of buzz around blockchain technology in insurance. Yet most insurance carriers are scratching their head at how to properly leverage the distributed-ledger technology, says Aite Group’s Research Director Gwenn Bézard.
“We’re at the same stage we were in the ‘80s with the Internet,” Bézard says. “Companies are trying to figure out just where and how to apply it.”
Examples of insurance companies actually applying blockchain are almost nonexistent, Bézard adds. Many are in the research and development stage. But there are two likely use cases for the technology, which financial services companies have been quicker to embrace.
One is to create a database for reinsurers of all the contracts they take on from carriers. Admittedly, cloud hosting exists in some ways to do just that, but there is an argument for blockchain being more secure, according to Bézard.
“Blockchain is tougher to crack, while cloud platforms are owned by third parties,” he said. “Like the Internet, no one really owns blockchain. So in theory, reinsurers can create their own databases. It’s just very complicated in practice.”
The other use case revolves around the Internet of Things. Carriers can leverage blockchain to verify information collected from connected devices, Bézard says. Blockchain has the ability to track and timestamp data from IoT gadgets, ensuring information was never tampered with by customers or manufacturers.
As for when the aforementioned use cases will deploy on a wide scale, Bézard believes the industry’s adoption of blockchain will be slow due to the technology’s lack of maturity.
“Even when mature tech exists, insurers are slow to embrace it. Meaning, it should take a while,” he says. “The oldest [blockchain] platform, bitcoin, is eight-years-old and has its own challenges. Newer platforms have their own kinks as well.”