Multinational professional services firm PricewaterhouseCoopers (PwC) recently published a report saying blockchain technology could save reinsurance companies between $5-10 billion globally.
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PwC: Reducing Costs With Blockchain
PwC’s research shows that blockchain solutions could reduce the
processing time and cost of placement, claims, settlement and key processes such as compliance checks.
The cost of acquiring, writing and servicing reinsurance comes from “reinsurance expense ratios.” PwC said that for reinsurers, expense ratios “are typically 5%-10% of premiums.”
The firm wrote in its report that:
“Our analysis of the potential for both more efficient data processing and reductions in claims leakage and fraud indicates that blockchain solutions could remove 15% to 25% of expenses, so delivering an industry-wide saving of $5-10 billion.”
Also, a vast amount of data flows between client, broker, reinsurer and outsource service providers, resulting in multiple data entry and reconciliation.
Blockchain solutions can provide reinsurance companies with a better view of identity and risk, PwC claims.
Reinsurers Turning to Blockchains
In May, the Financial Times reported on reinsurers turning to blockchain technology. This was largely due to Blem, an IT systems provider for the industry. The company launched a claims record system for reinsurers using blockchain technology.
According to Michael Mainelli, co-founder of Z/Yen, the developers of this solution, the system uses “timestamping and auditing who has used which documents.”
Mainelli explained the game-changing potential of a blockchain solution. “There have always been suspicions that insurers could change the data on what the situation was in the past,” he explained. With the immutability of a distributed ledger, that would no longer be a possibility.
Blem’s chief executive, Gavin Blem, said that “The opportunity that timestamping provides is a certainty that the information provided to the reinsurer existed at a particular moment in time and has not been changed since.”
Most of the financial blockchain projects are for payments. However, many reinsurers are already building some blockchain applications outside the payments sectors. Not only will reinsurers save costs, but they will also significantly boost client satisfaction and retention, PwC said.
How much do you think blockchain technology can save the reinsurance industry? Let us know in the comments section below.
Images courtesy of PwC, Z/Yen, Shutterstock.