Recently surveyed senior executives in the banking and insurance industries plan to more than double their investments in blockchain technology by 2019. The SAP Digital Transformation Executive Study, conducted in collaboration with Oxford Economics, is based on feedback from over 3,000 senior executives across 17 countries and regions. The research spotlights the performance of “digital leaders” – organizations that are connecting people, things and businesses intelligently and effectively to create change faster than the competition.
Smart contracts simplify insurance
Personalized smart contracts for travel insurance may be among the first blockchain use cases to emerge in the insurance industry.
To find out more, I talked with Robert Cummings, Global Head of Core Insuranceat SAP. He said that while insurance companies currently have more questions than answers about blockchain, many are beginning to explore innovations such as smart contracts. These contracts connect real-time information from multiple systems across physical things, documents and activities, triggering processes like claims, payment and reimbursement faster and potentially with greater accuracy.
Cummings thinks personalized smart contracts will be among the first blockchain use cases to emerge in the insurance industry. He reasoned that personalized travel insurance is simple, because everyone involved is these transactions is well-known and all the processes are connected to readily available information – someone books a flight, it’s known which aircraft and airline they’re flying on, and there are a relatively finite number of variables surrounding a flight cancellation such as a change in the traveler’s plans, weather or aircraft issues.
“In the future, smart contracts will connect with other systems, so if you buy travel insurance and your flight is canceled you’re automatically reimbursed without having to file a claim, and you can be offered a new trip or other related services,” he said. “Smart contracts on the blockchain have a life of their own, taking care of themselves as events occur.”
Cross-industry disruption from hyper-connectivity
Traditional insurers are busy searching for ways blockchain will deliver the greatest business value, and so they should. For example, insurers will likely need to rethink the role of claims adjusters who won’t be required to manage reimbursement in the same way when smart contracts are in place. A larger question is how blockchain providers could disintermediate insurance companies as we know them today. What’s more, it’s impossible to know at this point the tremendous upheaval blockchain portends for many industries that will become even more connected.
Jack Shaw, Executive Director of the American Blockchain Council, thinks blockchain will trigger a revolutionary change in how business operates in many industries, like the invention of the printing press, followed twenty years later by the double-entry bookkeeping system, both of which helped spark global trade and the Renaissance.
“Unlike innovations such as 3D printing, artificial intelligence and IoT, which tend to be applied at a specific process point or physical location for targeted improvements, blockchain uniquely ties together the transformation of an entire digital ecosystem, pulling together the benefits of all these innovations for every participant in the network because they can share and trust the same data,” said Shaw. “Everything about our economy and society is becoming increasingly more collaborative and interactive, crossing organizational boundaries,” said Shaw. “That’s why blockchain is so transformational. It will change things as much in the next 50 years as the printing press did in the last 500 years.”