by Joseph Young
Leading chief information officers from the insurance industry are expecting some major changes in the IT infrastructure of their companies. The majority of executives who participated in a study led by The Economic Times stated that blockchain technology will most likely make an official debut in the industry by the end of 2017. However, the technology will have to overcome the three barriers of scalability, security, and standardization.
There exists a wide range of categories within the frame of IT infrastructure which Insurance corporations plan to overhaul. These include customer experience, cloud, internet of things, artificial intelligence, chat bots, mobile devices, wearables, virtual reality, analytics, big data.
To develop and design a practical system for a company, IT experts are looking to technologies that are applicable to many categories. At this point, ideal goal of insurance companies is to set up a data-processing platform which can handle and oversee a large number of vast operations with efficiency, high security, transparency and low costs.
Vikas Gujral, the CEO of prominent Indian health insurance firm Max Bupa, stated that insurance companies are looking into the utilization of artificial intelligence, internet of things and blockchain technology, as these emerging technologies allow businesses and operations to scale in correlation with the growing consumer base.
One advantage blockchain technology has over alternative platforms and applications is that it enables insurance companies to oversee both the transfer of data and money within a single network.
As Gujral explained, the communication between banks and non-bank partners is vital for an insurance company. Employees and executives of an insurance firm must maintain an efficient relationship with their partners to ensure necessary data is updated and transferred at accurate times. The failure to do so could lead to millions in losses, for both the insurance company and its partners.
“The company has recently launched SARAL- a device and operating software agnostic application which automates the policy issuance process for banks and non-bank partners and speeding up the process significantly,” said Gujral.
A missing link SARAL has is the financial connection between bank and non-bank partners. It automates native insurance policy issuance and other important operations but it does not include the settlement of payments. The successful implementation of blockchain technology as a payment settlement system and data processing platform would allow insurance companies to provide services at faster speeds with higher security measures.
“I feel some innovative and breakthrough technology enablers like Blockchain and SDN will provide significant benefits for health insurance and overall Insurance sector as they allow for significant scalability for businesses,” Gujral added.
Aegon Life, a Dutch insurance company with revenues of around $33 billion per annum, and HDFC Life, a leading Mumbai-based insurance provider, also emphasized the rising trend of blockchain within the insurance industry. Thomson Thomas, chief information officer at HDFC Life Insurance emphasized that HDFC Life amongst other insurance companies will experiment with blockchain this year.
“Insurance companies will also experiment with technologies like blockchain. 2017 will be an interesting year filled with innovations, as insurance companies move ahead on their digital journey,” said Thomas.
Martjn de Jong, chief digital officer at Aegon Life Insurance, specifically stated that the company will move to a cloud based infrastructure such as the IBM hybrid cloud, which also offers blockchain-based services. “The move to IBM hybrid cloud of our digital IT systems enables faster time to market, which allows us to more easily connect and better engage with our customers,” said de Jong.
However, as educational institutions and research firms including the University of Pennsylvania and McKinsey have emphasized in the past, permissioned blockchain networks or custom-built blockchain-based platforms are likely to cause serious security and scalability issues if they are not transformed into open-source software and demonstrate attributes of existing cryptocurrencies and network such as bitcoin & Monero. Also, collaboration within the insurance industry is required to standardize the technology and open up wide-scale use cases.
PwC's DeNovo does not share the optimistic view of blockchain applications emerging from the insurance sector, stating that, "Even considering the positive outlier trends in InsurTech investment, the more promising disruptors are years away from gaining any measurable share. The byzantine regulatory landscape in insurance is far more complex relative to that of banking."
Insurance companies must ensure that its roadmap or plans of incorporating blockchain technology are revolved around the capacity of the technology instead of the functionalities of insurance technologies. Insurance firms should first analyze and evaluate the applicability of different blockchain networks or platforms and seek out for appropriate use cases after careful consideration of blockchain technology’s security, scalability and flexibility as well as the colossal regulatory challenges.