Multinational Smart Contract Insurance Policy Tests Blockchain Skills
Blockchain is quickly growing beyond its early association with cryptocurrencies like bitcoin and expanding across numerous industries. The distributed ledger technology, which makes it easier for global organizations to securely exchange assets and deliver digital contracts in a cost-effective manner, is becoming a top priority among senior executives around the world — although many are still in the dark about it, according to a recent Deloitte survey.
IBM, American International Group (AIG) and Standard Chartered Bank recently announced the first multinational, smart contract-based insurance policy using blockchain. The pilot effort is designed to streamline multinational insurance policies, one of the most complex policies in the industry.
Deploying a Global Reach
Blockchain’s capabilities are a good match for the specific needs of the multinational insurance industry. In addition to providing all parties with a unified view of policy, payment data and documentation, the secure and transparent digital ledger also limits visibility to participants based on their credentials. Users can record events and associated payments in each country related to the insurance policy. A single party cannot modify, delete or append a record without the consensus from others on the network.
IBM, AIG and Standard Charter Bank wrote a master pilot in U.K. that includes three local policies that cover the U.S., Kenya and Singapore.
Why were these three regions chosen? The U.S. is a vast and complex market, Singapore provides a growth region for Standard Chartered, and Kenya has a specific regulation rule called “cash before cover,” which means insurers will not guarantee coverage until all premium payments are received from the insured.
Because of these regulatory complexities, the three territories will allow the participants to fully test how blockchain technology can help contracts work more efficiently.
Blockchain’s high degree of transparency diminishes fraud and errors, and it also lessens the need for participants to contact each other to view policy data and status, as well as payment data.
“When critical data about the policy is stored on the blockchain, all permissioned parties in the network have a single view of the data, and no single party can make changes without the consensus of other members,” an IBM spokesperson told Computerworld.
“By creating a process by which we can arrange multinational insurance contracts through blockchain, we not only have transaction security but contract certainty across multiple business locations,” Emily Jenner, head of insurable operational risk at Standard Chartered, said in the IBM press release.
While early adopters are putting blockchain through its paces, many C-suite occupants still aren’t certain what the technology is all about or how it can help them.
According to the Deloitte survey of 308 U.S. senior executives at companies with $500 million or more in annual revenue, nearly two in five (39 percent) respondents had little or no knowledge of blockchain technology. On the plus side, the majority (61 percent) reported blockchain knowledge ranging from “broad to expert,” and more than half (55 percent) of this group said their business would be at a competitive disadvantage if it didn’t adopt the technology, Deloitte found.
Empowering Travel and Banking
Blockchain has a lot to offer global businesses. The travel industry is awash in data from multiple sources such as airline seat assignments, rental car bookings, hotel room assignments and frequent flier rewards. With blockchain, travel providers can be confident that data coming from outside sources is accurate and verifiable.
Banks can also benefit from blockchain-boosted security, faster speed and lower transaction processing costs, according to financial industry analysts.