So, you've been hearing a lot about blockchain, right?
Another digital disruption to change the way effective business gets done, blockchain is gaining attention. Blockchain is a distributed ledger that is increasingly discussed as a digital disruption technology with massively innovative potential in all areas of financial services, with a focus in the banking sector. However, blockchain technology also offers strong opportunities for insurers. The insurance market is taking notice, which means you need to be up to speed on the latest blockchain talk.
There is so much buzz about blockchain right now, it's hard to miss!
- Did you hear 15% of banks worldwide expect to widely implement blockchain, which is a ledger of transactions updated in real time by various institutions, by next year, according to an IBM report titled Leading the Pack in Blockchain Banking: Trailblazers Set the Pace, which surveyed 200 global banks? In four years, IBM asserts 66% percent of banks expect to have blockchain in commercial production and at scale.
- Some healthcare organizations are moving quickly on commercializing blockchain at scale and even seem to be ahead of the financial industry, according to a another report by IBM, this one Healthcare rallies for blockchains: Keeping patients at the center. In this report, IBM found that 16 percent of healthcare organizations, identified as “trailblazers,” plan to have a commercial blockchain solution at scale in 2017. This compares with IBM surveys of banks and financial market enterprises, which found just 15 percent and 14 percent, respectively, plan to be at commercial scale for blockchain solutions in 2017, according to the report.
- In the CNBC blockchain focus, The 2017 challenge for blockchain: Getting executives to understand it, the focus was on a Deloitte online survey of 308 senior executives at U.S. companies with $500 million or more in annual revenue to find out about corporate views regarding blockchain. Key findings from the survey revealed 28% of respondents had invested $5 million or more in blockchain technology, while 10% had invested $10 million or more. Still, 39% of respondents had little or no knowledge in the technology.
- In Blockchain in Insurance: Turning a buzzword into a breakthrough for health and
life insurers, a report by Deloitte, the messaging is that, although other industries, such as banking and payments, may have a head start on blockchain development, this disruptive technology is actively being explored as a potential catalyst for change by an increasing number of enterprises throughout the insurance industry.
- According to the McKinsey report, Blockchain in insurance – opportunity or threat, blockchain technology offers potential use cases for insurers that include innovating insurance products and services for growth, increasing effectiveness in fraud detection and pricing, and reducing administrative cost. In these application areas, insurers could address some of the main challenges they are facing today – such as limited growth in mature markets and cost reduction pressures.
A blockchain, as defined in the Wall Street Journal in the article CIO Explainer: What Is Blockchain, is a data structure that makes it possible to create a digital ledger of transactions and share it among a distributed network of computers. It uses cryptography to allow each participant on the network to manipulate the ledger in a secure way without the need for a central authority. The term blockchain today, as discussed in the WSJ article, usually describes a version of this distributed ledger structure. There are different blockchain configurations that use different consensus mechanisms, depending on the type and size of the network and the use case of a particular company. The bitcoin blockchain, for example, is public and permissionless, meaning anyone can participate and contribute to the ledger.
For insurers, blockchain can address competitive challenges, including customer engagement, limited growth in mature markets, and the realities of digital disruption.
As 2017 comes into focus for the insurance industry, blockchain is gaining steam as an innovation to watch. For the insurance sector, blockchain can facilitate growth, enabling more cost effective product development and greater client engagement opportunities. Blockchain is a technology ready for deployment, or, at a minimum, review by today's top insurers.