Blockchain technology is a shared and common database holding many entries that must be approved and coded. Essentially, blockchain technology provides a highly secure and efficient way to create a log of sensitive activity which is unable to be tampered with. This can include everything from money or property transfers to employees or customer records. Blockchain presents several opportunities and possibilities which businesses such as insurance companies can explore.
Blockchain technology: The global insurance industry
If we had to go back to 1686, when Lloyd’s was born in a London coffee house, the insurance industry globally was a business of utmost good faith, as it remains today. However, the insurance industry is nowadays experiencing major challenges which are causing low customer satisfaction and negative industry reputation mainly: deceitful claims; data spread over several systems; complex underwriting practices; error-prone manual processes; and disjointed data sources.
In this respect, blockchain technology can provide the opportunity to drive major change (which has been needed for a long time) in the insurance industry while at the same time improving transparency across the entire value chain. In this respect, in October 2016, five major global insurance and reinsurance undertakings namely, Aegon, Allianz, Swiss Re, Munich Re and Zurich Re (called the B3i group) joined forces and launched the Blockchain Insurance Industry Initiative to look at the impact of the new technology on the industry. A few months later, 10 new companies joined such group.
The B3i group and the launch of the Blockchain Insurance Industry Initiative
In September 2017, during the 61st Monte Carlo RVS conference, the B3i group declared that 23 new insurance/reinsurance undertakings have joined the initiative. During the same conference, the B3i group also launched the working test of a reinsurance prototype.
“B3i has brought insurers and reinsurers together with a real spirit of collaboration. We are now looking forward to launching the market beta-testing programme with the rest of B3i,” B3i Group’s Antony Elliott had told the Insurance Business Magazine.
A new era for the insurance industry
Another interesting initiative was announced in September 2017 by AXA Insurance Company (an Irish-based insurance company), whereby it launched an insurance product which is based on blockchain technology. The idea is to automate payments of compensation for late flights for air passengers between the Charles de Gaulle airport in Paris and the United States. AXA Insurance Company announced that it is planning to introduce this new insurance product internationally through partnership agreements with major worldwide airlines.
Blockchain technology will positively change the insurance and financial services industry
Blockchain technology: An opportunity for insurance companies in Malta
Malta was always at the forefront in developing new and innovative insurance structures and legal frameworks. In fact, Malta is highly attractive for the establishment of commercial insurance and reinsurance undertakings, captives and insurance management companies. Furthermore, the insurance industry is considered as one of the main pillars which aided Malta to establish itself as a renowned and stable financial services hub, together with the Malta Financial Services Authority (MFSA) which has created a stable, yet innovative, jurisdiction aimed at encouraging the growth of insurance and reinsurance business.
Malta in the future of blockchain technology
In this context, the next big step for the insurance industry in Malta is to make the most of blockchain technology. Blockchain, and all its derivatives, presents a real opportunity which local insurers, together with the MFSA should explore. Recently, the Maltese government signalled the intention to be the key facilitator to drive the blockchain opportunity forward. This may prove to be a highly beneficial opportunity for local insurers, especially since the local insurance sector is composed of both locally owned businesses and foreign entities that opted to re-domicile their business in Malta.
Accordingly, insurance participants in Malta are highly encouraged to become more proactive in the application of blockchain technology in their processes. The B3i group initiative could be an opportunity for insurance companies in Malta to be directly involved in key pilot projects to study blockchain’s use with the aim of facilitating growth in the local insurance industry.
In conclusion, insurance industry participants in Malta can be part of the future as blockchain technology will positively change insurance and the financial services industry. Certainly, as with all economic and technological transformations, those nations that manage to adapt first are the ones that will find themselves at the centre of new, emerging economic ecosystems. In this respect, Malta has all the right ingredients to become a hub for this new ecosystem – with collaborative regulators, educated workers and mature local expertise in multiple sectors including the insurance industry.
Nicholas Warren is a senior manager and Alistair Cuschieri is an assistant manager in the Financial Services Practice Group at Chetcuti Cauchi Advocates.
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