In a new article for the IAIABC, the tech analyst Jeffrey White introduces readers to coming innovations in the insurance industry for which, he says, members of the workers’ compensation community should prepare. These innovations in insurance placement, claims adjustment, and payments are made possible by computer technology and, more immediately, by advances in artificial intelligence. See Jeffrey Austin White, Insurance On-Demand: Are You Ready for Disruption?, IAIABC Perspectives, p.8 (March 2017).
The innovations are the subject of an exploratory program known as the Blockchain Insurance Industry Initiative, or B3i, organized by insurance giants including Allianz and Zurich. Their goal, White states, is to “explore the potential of distributed ledger technologies to better serve clients through faster, more convenient and secure services.”
So, what is “blockchain technology”? A reliable source explains that a “blockchain” is a “distributed database that is used to maintain a continuously growing list of records, called blocks.” A “distributed ledger,” similarly, is “a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions.”
How would insurance utilize such technology? White explains that these technological advances constitute “a new way to store documents, financial transactions, and businesses workflows without the need for central authority or intermediary. In the world of insurance, it is being considered to facilitate payments, collect premium, process claims, store policies, and execute contracts. It allows for the automation of business processes typically managed by a company but without the overhead of employees and paperwork.”
Of course, Bitcoin is the classic blockchain technology product with which most are familiar. See https://en.wikipedia.org/wiki/Blockchain (this note also briefly referencing insurance).
E-technology, the author details, has in fact fostered the development of at least four innovative insurance models. These are (1) “Usage Based,” such as “Pay How You Drive”; (2) “Bought-by-Many,” whereby insurance agents “scour the web” looking for individuals with similar lifestyles, and offer them corresponding insurance; (3) Peer-to-Peer, a modern form of mutual insurance; and (4), the most futuristic, Decentralized Autonomous Organizations (DAO) – a form of peer-to-peer insurance, but which eliminates any central insurance company and is entirely managed, anonymously, over a “blockchain implementation.”
White’s major theme is that these concepts are not receptive to insurance regulation. This is particularly true for the Bitcoin-style DAO. In fact, the DAO is “anonymous by design” and hence “it would be extremely difficult for the government to limit or impose sanctions because it is anonymous … and technically difficult to shut down.”
It is in part for this reason – the problem of regulation – that White states, in his conclusion, that these insurance innovations will be delayed in their introduction to the workers’ compensation market. Technological issues abound; carriers and vendors “would need to be open to sharing data”; a sophisticated “standalone platform does not yet exist for a true peer-to-peer network in the insurance field”; and the “limited amount of cooperation, slow adoption of technology, long tail nature of the claims, and the huge amount of regulation in the industry will continue to temper true innovation in the workers’ compensation industry.”
White says don’t look for these innovations in our field for another three years but, with this parade of obstacles, one senses that, for better or for worse, the wait will be much longer.
See also Kevin Aang & Ali Safavi, Blockchain is empowering the future of insurance, Tech Crunch (AOL, Inc., October 29 2016), available at https://techcrunch.com/2016/10/29/blockchain-is-empowering-the-future-of-insurance/.