Blockchain can transform protection insurance for the next generation
13 Dec 2017 - Estimated reading time: 2 minutes
Blockchain, the decentralised digital ledger, can transform the protection insurance market and position it for future success, says Hymans Robertson, the leading actuarial and advisory consultancy, in its Protection Insurance Focus report issued today. The industry can harness this new technology and shake-up the way it creates products, preventing them from being irrelevant and unappealing to today’s customers.
Commenting on the industry’s need to change, Richard Purcell, Technical & Innovation Lead, Life and Financial Services Hymans Robertson says:
“Protection insurance providers are currently facing a cross-roads that could threaten market growth in the future, unless new technology is embraced. The protection market is built on the traditional model that customers begin work with a single employer, buy a house and have a family. However, we are seeing this model turned on its head, with younger people in particular working more flexibly, renting rather than buying a home, and putting off having a family. This means the protection market risks becoming irrelevant to the next generation of customers unless they respond to the changing customer needs and behaviours we have identified in our report, by transforming their products and embracing new technologies like Blockchain.”
Commenting on how Blockchain can help Providers develop products, Richard Purcell, continues:
“Blockchain can be used to provide speed, transparency and innovation to any form of transaction business, insurance included. It can enable more efficient underwriting, the development of bespoke products and a smarter way to process and manage claims.
“To explain how this could work, Blockchain could play a vital role in delivering more flexible products, being used to quickly and simply collate data from a range of sources, giving a clearer single view of a customer. This is particularly important as we see the rise of the gig economy, where people could be working for a number of number of organisations at any one time. Data flows could include the amount of jobs completed, miles driven or income earned from different gigs, creating a complete picture of a customer’s income. This additional information could help more accurately underwrite and assess risks.
“Blockchain could also be used to provide a better view of a customer’s expenditure and debt levels, allowing insurers to provide dynamic cover levels that reflect a customer’s actual outstanding debt levels or essential expenditure, rather than relying on out-of-date information or estimates currently used to define cover levels. This technology could save time collecting such information during the advice process, which is good news for advisers. It also gives more accurate information about the customer’s circumstances on an on-going basis, removing the risk of under or over insurance, and ultimately giving better value to the customer.
“Claims handling in other insurance markets has already seen a leap forward using Blockchain, with smart contracts being built up on this technology. In catastrophe insurance for example, Blockchain has been trailed to automatically trigger payments subject to a set of pre-determined adverse weather conditions being recorded. There will be more and more adoption of Blockchain for self-execution services, and there is no reason why this technology could not be used within the world of protection to facilitate the payment of simple claims, or help manage existing claims.”
Looking at what the future holds, Richard says:
“Our report highlights how the protection market is still thriving, but faces a fork in the road. There is a choice to take either the well-trodden path of offering existing products that meet the demographic needs of the past, or one with an opportunity to embrace new and exciting technology, such as Blockchain, that can support more flexible products designed for the next generation of customer. With early positive signs from the way this technology has been utilised in other parts of the insurance industry, it could provide a catalyst for the protection insurance industry to transform itself in the coming decade.”