Blockchain and insurance: why the delay?

07 June 2017

The process of buying and administering insurance involves a large number of parties and processes. Today there is a lot of duplication and delay in the process.  The ability to save time and drive efficiency is why the insurance industry has taken such a keen interest in blockchain. Blockchain through the decentralisation of trust means that value can flow between parties without the need for multiple intermediaries.

There are a number of schools of thought. As with any innovative technology, there are those who see its potential and others who see issues or are prepared to adopt a 'wait and see' approach. Some in the industry see blockchain as a disruptor and are concerned about its impact, others see the potential opportunities and improvements that could emerge. Importantly, though, all within the insurance space realise that blockchain is real and it requires consideration. There are some interesting findings from our latest Global FinTech survey around the implementation of blockchain but let's look at how this translates across the insurance industry.

The survey shows that 35% of UK FS respondents are very or extremely familiar with the technology, compared with 24% globally. Specifically within insurance we have seen companies looking at blockchain more seriously in the last 12 months, with greater levels of understanding of what blockchain is and it’s potential. We have seen a greater increase in activity around industry groups and consortiums however they are lacking tangible action. Based on our activity in this area, there are a number of reasons for this lack of action:-

  1. They see the value of blockchain but want to see what others will do first
  2. They see the value of blockchain but struggle to see how it can be implemented to a stable (yet agreed, stale) industry
  3. They see the value of blockchain but believe it to be irrelevant to insurance.

In all cases, everyone sees the value of blockchain, yet the industry is concerned about how or where to start. Why is this the case?

Based on the paragraph before, what is all the more confusing is that all UK FS respondents said that they would implement a blockchain solution by 2020, however 43% said it is not in their strategic plans. As our colleague Steve Webb discusses in his blog, even if companies don’t intend to implement blockchain right now, it should at the very least be considered in their five-year plan, particularly if it is expected to be in production by 2020. The technology will drive radical change and innovation that will take years to fully implement so there is a need to start planning for it now or risk being left behind and wasting investment in legacy technologies.

We see insurers experimenting with blockchain, viewing it as a viable solution but no one is quite ready to take it into production just yet, the first may be ready towards the end of this year or early next year. For us this is the most surprising part. At PwC we have worked with industry players over the past few months to explore policy placement and claims by developing two Proof of Concepts. At the moment, though, even after the initial experimentations with blockchain, reservations continue to exist as to how to move blockchain from the lab and into production. With a small group from the industry in POC pilot stage and only a couple closer to production it is difficult to imagine that they will be ready in time so what can insurers be doing?

The only way to truly unlock this transformative technology is by going through the adoption process and collectively changing how insurance works e.g. Lemonade who have reversed the traditional insurance model by increasing transparency and paying claims quickly with no hassle, then giving the leftover premium money to a common cause. You can’t be a fast follower in this world. The technology needs to be understood and thought through, if you don’t put in the effort in the beginning you could end up making mistakes when trying to catch up. It’s like a bullet train leaving the station at 400 mph and the followers on carts trying to catch the train.  

Insurance is at a crossroads. If, as an industry, it takes the road marked ‘as we are’, there is a high possibility the industry will stagnate and more peer-to-peer insurance solutions will begin to dominate. However, if it decides to take the road marked ‘innovate’, there is a strong possibility the destination will be a world powered by blockchain. Where do you want to be?

Christopher Clements


Michael Cook

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