DLT: INTEROPERABILITY
RE-INVENTING THE VALUE CHAIN John Carolin is CEO of B3i, an industry initiative working to mutualise the benefit of distributed ledger technology. Here, he explains how it’s already creating real business value in reinsurance
The insurance industry is in a race to modernize and make best use of new digital technology in order to respond effectively to current external and internal challenges. But is it leveraging the technology to its full potential? The list of external challenges the insurance industry is currently facing is undoubtedly quite long. It ranges from COVID-19, volatility in financial markets and investments, through to an increasing frequency and severity of natural catastrophes. However, there is a fundamental, internal challenge that persists: unnecessarily wasteful administration. This has resulted in admin costs as a percentage of revenue increasing by 40 per cent in the insurance sector between 2009-2018, while other industries have been able to cut costs by 20 per cent during the same period. Where does this admin problem stem from? Players in the risk transfer industry have made incremental investments to improve and to digitise their internal processes and procedures. At the same time, business complexity, including transactional volumes and data requirements, has grown significantly. In order to place and administer a single
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contractual agreement among the various parties involved, manual processing, recalculations and reconciliation still account for a significant proportion of the work carried out; as much as 35 per cent of operational costs are back-office admin. Despite incremental improvements being achieved, the industry has not yet reached, at global and wide scale, a satisfactory level of process automation, and remains still strongly bound to manual processes. Against this background, it’s clear that companies’ individual digital transformation strategies will not get us to where we need to be as an industry. Instead, it is vital that we transform the common foundations of the industry and thereby fundamentally change insurance operations, end-to-end. This is something that cannot be achieved by insurers or intermediaries acting alone. So which technology to choose in order to optimise and automate market-wide processes, to generate significant savings in time and cost?
Companies’ individual digital transformation strategies will not get us to where we need to be as an industry… it is vital that we fundamentally change insurance operations, end-to-end Various market players decided to form B3i, initially started as an industry consortium, which was later incorporated as a for-profit company, to realise the potential of blockchain and distributed ledger technology (DLT) in the insurance industry. The clear objective set by the shareholders, which include 21 major insurance companies across www.fintech.finance
