Blockchain can transform insurance, says Accenture

Blockchain has the capacity to transform the insurance industry, according to business services group Accenture.

Blockchain is a distributed database of transactions developed as the framework behind the Bitcoin digital currency. And according to Abizer Rangwala, managing director of insurance strategy at Accenture, it is Blockchain’s ability to assure the integrity of a transaction that is attracting investment from financial services companies.

“The nature of Blockchain as a distributed database makes it difficult and prohibitively expensive to unilaterally edit, since so many copies exist,” Rangwala wrote in a blog.

“Trust is another virtue of Blockchain,” he added. “The blocks provide transparency and record the history of a particular contract or deal.”

Dealings are more direct, he said. Blockchain transactions are conducted by the parties themselves with no third party or central body acting as intermediary.  

The US stock market operator Nasdaq is building a system to use Blockchain in private markets, while online retailer Overstock just received regulatory approval to use the Blockchain to issue its stock via an alternative trading system (ATS) rather than through NYSE and Nasdaq. 

“The effect of Blockchain for insurance products is a not as clear-cut and will likely take longer to emerge than for banking,” Rangwala said. But he detailed ways in which Blockchain could transform the delivery of insurance.  

The speed and ease with which contracts could be changed and the time-stamping feature of Blockchain could, he said, allow tailored contracts that reflect actual risk, such as on-demand auto insurance effective only during the hours a car is being driven.

Blockchain could also help create and manage large layered commercial insurance programmes where different organisations assume separate layers of the risk, and to manage insurer-reinsurer transactions.

Or it could help in the development of peer-to-peer social insurance mechanisms that take advantage of Blockchain contracts to bypass insurers and fund their own coverage pool.