Aegon, Allianz, Munich Re, Swiss Re, and Zurich, some of the biggest insurers and reinsurers in Europe, have launched an initiative to adopt blockchain technology in the insurance industry. The project aims to use the blockchain to improve digital contracts and transactions. However, the pilot demonstrates that the missing privacy on a blockchain is not only a challenge just for criminals.
With Allianz, another major company from the German economy reaches out to adopt the blockchain. The initiative B3i (Blockchain Insurance Industry Initiative) aims to bring several insurance companies, Allianz, Aegon, Munich Re, Swiss Re, and Zurich, together to fathom if the blockchain can be used in the insurance industry.
The basic attitude is, no wonder, optimistic. An insurance company works with a lot of contracts and transactions, and this exactly is what the blockchain can improve. “Blockchain offers huge potential for enabling digital contracts and transactions amongst multiple parties to be executed in a secure, transparent and auditable way,“ the press release states. Processing transactions and contracts on a blockchain can enable a “consistent, automatic contract execution environment where transactions and contracts are stored on a shared ledger, thus reducing the administrative workload of multiple stakeholders to ensure contract consistency and execution.“
This push is not the first venture whereby the insurance company from Munich starts to adopt blockchain technology. In June of this year, Allianz cooperated with Nephila Capital to test the use of a blockchain smart contract for transacting a natural catastrophe swap. Through this test, Allianz learned that among other advantages blockchain can “significantly accelerate and simplify the transactional processing and settlement between insurers and investors.”
With the cooperation with Aegon, Munich Re, Swiss Re, and Zurich the insurance company takes the venture one step further to the core of blockchain technology. The main advantage blockchain offers over conventional databases is that it enables several parties to cooperate without the need to trust each other or to delegate trust to a central entity. On a blockchain it is no assumption that the other party tells the truth – it is a fact. However, to exploit the full potential of blockchain technology in the insurance industry you need several major actors to stay on the same chain.
In a first step the initiative wants to “explore whether Blockchain technology can be used to develop standards and processes for industry-wide usage and to catalyze efficiency gains in the insurance industry.” The companies are cooperating to achieve a proof-of-concept for inter-group retrocessions by launching this pilot project.
One of the most interesting aspects of the pilot project, however, is that it is “using anonymized transaction information and anonymized quantitative data.” The lack of privacy on a Blockchain could be one of the major obstacles for insurance companies with regard to implementing the technology. Although the companies want to use the transparency of the blockchain to make sure that the shared information is valid, they do not want to let the other party have insights into internal business transactions.
To get the one thing without revealing the other you need procedures to anonymize blockchain transactions and contracts. The real solution insurers invent might therefore not be on the blockchain, but in the range of zero-knowledge proofs; cryptographical methods to proof you know a secret without revealing the secret itself. Maybe in the future, we will also see some kind of mixer made by Allianz. Beside this speculation, the pilot project of the insurance companies demonstrates one thing; privacy on a blockchain is not just an issue for darknet markets. It is a need for everybody.