Commercial & Product
A blockchain can be used to store any digital record, whether data, images or contracts. Uses range from records of transactions to recording images, or digital keys that are hashes of images, to prove authenticity.
In practical terms, the most efficient use of a blockchain is to minimise the size of each record in a block and to use a structured schema.
Due to the fact that schemes will have various parties involved and a number of links in the process, blockchain and distributed ledger technology (DLT) is ideally suited. DLT and blockchain remove the need for bordereaux and simultaneously connects all relevant parties in the relationship. What may have taken months can now be processed accurately, securely within seconds and with a full audit trail.
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How can distributed ledger technology help solve the problem of fragmented databases of different parties?
For insurance the distributed ledger solves two big problems.
The first is the transfer of policy and claims data between interested parties. Currently these parties need to keep their own set of records that keep track of what risks they are liable for. Even organisations that use a trusted intermediary keep their own copy of these records. With a distributed ledger there is one golden source of data that everyone uses, and one way that data can be modified (defined in smart contracts), so there is no need to maintain separate systems.
The other big benefit of distributed ledger is frictionless, real time payments that are much cheaper than on traditional payment systems. These combined benefits result in significantly lower operating costs for insurers and the opportunity to introduce new products.
The ‘shape’ is determined by the specific insurance contract – for example a Quota Share has a different ‘shape’ to an Excess of Loss contract.
A standard contract shape for each type of product/risk category will be developed as required, and be reused for other customers i.e. products developed for one market/customer will be reused (although some modification may be necessary from one jurisdiction to another).
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