Blockchain in Insurance. Why do we need it?
In 2009, mass understanding of Bitcoin’s digital currency transaction capabilities, let alone its blockchain foundation, was tentative at best. The technology was dismissed as niche and experimental.
The leaps that we are able to make in innovation and technology are rarely more obvious than in the cryptocurrency and blockchain space. In seven short years since the inception of Bitcoin, blockchain technology is now being explored by the most traditionally conservative industries including financial institutions and central banks. Venture capital investments have rapidly increased and thus accelerated the growth of this technology, with US800M invested in blockchain related startups in 2014/15 alone (McKinsey & Company: Insurance 2016).
In addition to banks and financial institutions, insurance companies are also uniquely positioned to apply blockchain technologies in their operations and structure. Bob Crozier, who has been a core member of the Edge Innovation Team at AIA since its inception 2014, shares his vision for blockchain in insurance.
1. When did it become clear to you that there were untapped opportunities in blockchain and insurance?
Everyone talks about Blockchain’s relevance to FinTech but because it’s so robust, the technology can be applied to a whole host of different industries.
It has been on our radar in its Bitcoin blockchain guise for some time but with the advent of Ethereum and the notion of “Smart Contracts” in July last year we undertook more targeted research.
How insurance works is really a series of contracts. This means that the potential has became increasingly obvious to us.
2. What do you think will be the main challenges to incorporating blockchain with an organisation like AIA?
Blockchain and Distributed Ledger Technology (DLT) are still quite immature technologies from an insurance perspective. Most of the worldwide focus has been on solving the payment problems and transaction volumes to get to the ‘Visa” standard. The main challenges for us will be securing customer data and getting the insurance industry to work together to solve common problems around identity and fraud. The power of this technology will be unleashed when we, as an industry, all work together and take advantage of the network effect.
3. AIA recently joined the R3 Blockchain Consortium. Why, and what does this entail exactly?
As well as pursuing our own Blockchain and DLT initiatives internally, we feel it is our duty as the largest independent publicly listed pan-asian insurance group to lead the way in discovering the potential of this technology for our industry and indeed the customers we serve. Joining R3 is a means for us to work with our financial services peers in setting the standards and shaping the agenda to solve pain points for our customers and the industry itself. We have a bias toward building and we can’t do that sitting on the sidelines. We will work on projects with other R3 partners that aim to solve those problems as well as inform regulators of our progress so they can join us in this new phase of discovery.
4. Do you see blockchain solutions as being differently applied in the Asia-Pacific region where you are based?
No, we are solving problems that are inherent to lots of markets around the world. If we create a better, faster ‘Know Your Customer’ or ‘Anti-money Laundering’ solution here in Asia then the aim is to share this innovation with our international network.
5. What’s the coolest (non-insurance related!) application of blockchain you’ve seen so far?
There are so many I don’t know where to start! A digital identity for everyone making ID theft near impossible is one area that is really cool. I’ve also seen an application that provides a method of proving the provenance of diamonds from mine to jewellery which offers the hope of ridding the world of conflict diamonds.