Insurtech Review | May 2019
Ken Marke, Chief Marketing Officer at B3i, gives a little lesson in blockchain technology, and how it could benefit travel insurance from both a business and consumer perspective
Blockchain – or more correctly, Distributed Ledger Technology – is not a completely new technology. It has in fact been in use for over 10 years in the field of cryptocurrency. In the business and insurance world it enables information to be shared quickly, securely and confidentially with the added bonus of immutability and smart contracts.
It is commonly known that the insurance industry consumes and shares data in high quantities. Much of this information is private data on individuals, and reliance on this information requires trust and transparency. Blockchain helps to provide users and data owners with confidence in the authenticity of the data and its security.
This article aims to demystify the concept of blockchain and expose some of its uses and relevance to travel insurance. Existing processes of distributing policies to customers, as well as servicing and handling claims, can be simplified and made more efficient. Beyond simply improving existing processes, blockchain will offer opportunities to review and revise how travel insurance is serviced.
What is blockchain?
Initially a practice designed
to support the recording of cryptocurrency Bitcoin transactions transferred between two parties, today blockchain technology has evolved to become a
protocol that allows the recording of any type of transactions transmitting value. It permits any stakeholders to collaborate and agree on the legitimacy of transactions without a central body overseeing that process.
The method is transparent, based on predefined, impartial, consistent and efficient applications disseminating a secure, digital and chronological record which is immutable, shared in real time and completely auditable.
The technology platform provides significant efficiencies due to the nature of the single and shared ‘record of truth’. It also facilitates secure data sharing or ‘cryptographic security’ and the opportunity to develop automated contracts.
Understanding the benefits to the travel insurance world
As all transactions are externally logged on a blockchain between its participants, it offers a level of transparency unavailable in the current insurance model.
For example, there are often multiple levels of stakeholders involved throughout the lifecycle of a travel insurance policy, especially if the policyholder has to make a claim; information may need to be shared between the insurer, broker and customer before it even reaches the hospital or healthcare professional. This process of going from one end of the chain to the other can be slow, but blockchain can help with that.
When a holidaymaker needs to make a medical claim while abroad, the attending doctor would be able to send and receive information about a patient’s medical records, policy cover and any data which is related to that case immediately and in real time. Not only is the process incredibly private, but here blockchain offers a massively streamlined interaction – making it a valuable proposition for the insurance world.
Blockchain-developed programmes can dramatically increase the efficiency of service in two ways.
Firstly, by applying automation within blockchain, insurers can establish ‘pre-approved contractual agreements’ (i.e. smart contracts) with hospitals and physicians.
Secondly, when completed transactions between parties take up a ‘block’ that’s subsequently linked to the ‘chain’, over time results form a dependable record of all medical interactions for the patient and the rest of the value chain.
Blockchain permits any stakeholders to collaborate and agree on the legitimacy of transactions without a central body overseeing that process
A further illustration of distribution progress comes from the example of a health insurance agreement, where each party would usually give the other a contract whilst dealing with many third parties. With blockchain technology, each stakeholder can now individually and digitally load only the information that’s relevant to their shared contract. This means no oversharing of information – and when a transaction is executed, all partakers can view the status, history and process of what’s being authorised.
True disruption and adding value
The global travel insurance market is expected to be valued at more than US$35 billion by 2025, owing to increasing levels of tourism globally. Thus, tourism growth has provided an impetus to the industry to capitalise on the rising demand for insurance among travellers. But, we’re in an increasingly uncertain place with new issues that can impact travel plans and the insurance arena – for example, terrorism, Brexit and evolving US travel and medical restrictions. Brexit in particular presents UK travel insurers with some uncertainty in areas such as the future of the European Health Insurance Card, what form any future reciprocal arrangements may take and how this may impact medical costs in the future.
When it comes to issues we can control collectively, how can we best add value? Regulation is increasingly focusing on customer value, so we need to be able to demonstrate this more effectively. Customers expect exceptional service irrespective of price, so this must remain central to any customer proposition. As an enabler to the insurance process, blockchain can help improve the customer journey, often when people are at their most vulnerable, having experienced an accident or requiring support due to delays. Blockchain can add further value as follows:
Better customer care, when they need help the most. Patients will experience an increase in speed with regards to the authorisation of treatment by insurers and understanding of cover. Plus, medical records will be delivered more quickly to healthcare practitioners.
Increased speed in paying policyholder claims. For example, in instances such as travel delay compensation, details will already be known by insurers and shared to the value chain via blockchain technology.
Increased transparency and fraud protection among insurers, reinsurers and regulators through distributed databases. Pre-existing medical conditions cannot be ‘forgotten’ during the quote and buy processes, as they will be accessible to insurers and brokers through distributed technology.
Risk transparency. Improved ability for insurers to calculate and price risk through new, verifiable and secure sources of data.
Better for the customer
The more we know about customers and the more intelligent the data and technology, the more insurers can tailor products to address the shifting change in travel needs.
Technology such as blockchain and AI can enable services to be efficient and automated – making the customer journey smoother. However, it’s often true that the only time you really find out how good your insurance company is, is when you go to make a claim.
We must, however, protect our customers from over-automation. A traveller in need may want to speak to someone friendly and knowledgeable for support on the end of the phone, rather than be ‘helped by an algorithm’; soft skills and trained employees remain paramount for listening to customers and communicating with them. Team members like this are the shop front for the company.
Blockchain should only be used when it’s the right thing to do: after all, we all want the service reputation of our industry to continue to soar and engender greater trust with customers.