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Author: Arkajyoti Guha |03/02/18

Blockchain’s role in Multinational Insurance

A multinational account in the insurance industry is an account which has assets and exposures outside its home country. A contract providing coverage in the home country is known as the ‘Master Policy’ and its subsidiaries are known as ‘Underlyers’.

Multinational insurance is complex as it involves different regulations, payment structures and policy terms & conditions in different countries.

Various parties are involved in a multinational policy in the form of ‘Global Customers’, ‘Local Customers’, ‘Global Brokers’, ‘Local Brokers’, ‘Insurer Home Office’ and ‘Insurer Local Office’. The above stakeholders need to share data involving policy, claims & payment and most of this communication happens through emails, phone calls and emails instead of a trusted centralized system

Current challenges faced by the insurance industry:

  • Communication: The multinational policy fulfillment process starts with Underwriting and ends with Booking & Policy Issuance. There is a sizeable amount of lead time involved in this end-to-end lifecycle as it involves communication between multiple parties. The goal is to reduce this lead time and bring in greater transparency.
  • Productivity: The key objective of insurance companies’ workforce is to stay focused on day-to-day activities. However, employees spend a lot of time in collecting information and generating reports for their brokers and customers.
  • Premium Collection: A significant part of a local premium collection from various local clients exceeds the ‘Permissible Days Outstanding’. This impacts the revenue of multinational line of business significantly.
  • Reconciliation of Payment: Manual effort is involved in reconciling between different systems, banks’ feed and collection data from client & broker.

The Blockchain Factor:

Blockchain technology can play an important role in managing this complex multinational policy contract.

Blockchain can create a safe and secure environment among insurer, customer, broker and banks where these stakeholders can record activities and real-time transactions in shared ledgers. Information on these ledgers cannot be modified and are secure from tampering or hacking. Final policy contract and various stages of the contract would be put on this ledger, bringing transparency. Every stakeholder would have access to its blockchain node and would be viewing real-time information.

Benefits of Blockchain:

Trust Aspect: Policy contracts hosted in the blockchain will ensure a common view of the agreed terms & conditions between the insurer, insured and the broker with no provision for modifications.

Productivity: The customer or insured would have a real-time view of his policy/claim transactions by accessing his blockchain node. This will allow the insurer to focus on his principal work area than interfacing with the insured or broker in gathering information or generating reports for him. This will potentially enable the user to highlight pain points much earlier.

Compliance: The entire audit process will become much quicker as real-time access to data, a collection of information from brokers and other third parties will become a reality. The entire verification and validation activities of compliance will be achieved much faster.

Payment Reconciliation: Payment information will be posted to blockchain and the blockchain itself will be able to match payment transactions in the form of ‘Not Fulfilled’, ‘Partially Fulfilled’ or ‘Fulfilled’.

Finally, it needs to be seen how quickly Insurance companies in the ‘Multinational Line of Business’ accept and adopt blockchain.

What are your thoughts on blockchain and its significance in the multinational insurance industry? Do you think the adoption of blockchain technology in the insurance field is feasible?

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