A look at blockchain in insurance
Welcome to Insurance Covered! The podcast that looks at the inner workings of the insurance industry with the help of expert guests. Our guest this week is blockchain expert and entrepreneur, Walid Al Saqqaf, and we will be discussing blockchain and its uses in the insurance industry.
We start by discussing what blockchain actually is. Walid explains that blockchain in its simplest form is used to emphasize the value of data. Blockchain enables you to engage into the exchange of value around data and that opens a world of opportunities for the public. Blockchain enables us to facilitate the sharing of data from the value standpoint, your data has value to you and therefore should be protected and not given for free. Walid uses the example of cryptocurrency to explain further what blockchain is and can be.
"If I send you a Bitcoin, that piece of information, that data has value. You could go to an exchange it for traditional currency, but you want to make sure that if I send it to you, I haven't sent it to anybody else or that it has been misappropriated, you want to know that once you have received it, you are the owner of that Bitcoin, right? And you can see a trail history of me having been the previous owner of it and somebody else having been the owner of it. Now you can give real value to data whether it is currency format, such as bitcoin, whether it is an insurance policy, that has value, or whether it is the deeds to my property for example. All of this data now has value and you can see the history of who has ownership of it".
To simplify it further Walid uses the analogy of a bank ledger, every time a transaction occurs the ledger records it. Blockchain is like this for online data, it allows you to see the history and movement of data every time a new transaction occurs a new block on the chain is added. He goes on to explain that Blockchain is fundamentally about trust and transparency, particularly with online and digital assets. When you are about transfer your money into Bitcoin, you want to make sure that that Bitcoin is legit, if you want, and that you are now the rightful owner of it.
We then go on to look at Blockchain and its uses in the insurance industry. The insurance industry has traditionally looked at pricing risk by looking at historical data. In a world that is increasingly digital, where decisions have to be made on the spot, you need to access the real time data and you need to be able to make real time decisions, Blockchain can provide this. And an example of that is Insurwave. Insurwave is a marine insurance blockchain solution that was initially built by Maersk, by a number of insurance companies, EY and Guardtime. The initial proposition was to equip ship captains and insurers to be able to make informed decisions in real time considering a number of criteria and real time risks. For example, a ship captain, can sail through a war zone and save time and also money on fuel, or they can choose to avoid the risk and sail around it. With real time data insurers can see the risks and see the captain's decision to either avoid or take the risk, and as a result can alter the premium accordingly.
So now you have a facility as an insurer to gain external data, you have a network data strategy that helps you understand risk better, that helps you price yourself better and more importantly to come full circle back to the beginning of the podcast, for you to build better customer-centric propositions.
Walid finishes by summarizing how Blockchain has changed things and how it will continue to do so in the future "what blockchain has facilitated, is a creation of a new asset class of trusted data. And this is the critical piece. Because that new asset class will enable you to build new business models, new revenue opportunities, new customer-centric propositions that you could not have done without blockchain because the key as I said is trusted data".
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