Five reasons why blockchain will transform insurance facilities
Broker facilities are changing the way business is placed in the London market, and can help clients benefit from superior terms, pricing and coverage.
(Re)insurers can also see new business they wouldn’t otherwise access, while facilities can provide brokers with large volumes of data that can be analysed to optimise pricing and coverage.
But large frictional costs in coordinating data and process between participants, as well as concerns over data security and ownership, are currently limiting the potential of facilities to fully deliver these benefits.
For facilities to reach their potential, co-ordination of secure data between all parties is essential. The use of blockchain technology provides the solution that allows participants to operate faster and slicker, but with significant improvements in data quality.
Here are the top five reasons why blockchain and SmartContracts are critical to the successful performance of facilities:
1. Promise efficiency gains – for all counterparties
Blockchain technology reduces the burden of setting up, synchronising and managing the data critical to establishing contract terms. The technology takes away the burden of bordereaux and spreadsheets and proves an end-to-end audit trail that enables the automation of processes and brings efficiencies beyond the placement of risk.
And these benefits multiply with scale. For a global programme facility, having large number of counterparties including brokers and fronting partners, blockchain technology removes the need to rekey and reprocess data across multiple systems. This means all parties, can benefit from the efficiencies (cost, time & data quality) blockchain brings.
2. Data is secure and privacy can be controlled
Working together as a ‘mini-market’ is central to the premise of facilities, creating the need for partners within the facility to share data.
These ’mini-markets’ can involve many partners, particularly for global programmes where local brokers, fronting agents, and carriers may participate. Sharing data is critical to the success of the facility, but not all partners need access to all the data.
Blockchain technology ensures all of this data is secure. The privacy of the data can be controlled so only those who need to see the data for each contract have access.
3. Everybody gets a ‘single version of the truth’
Because blockchain has removed the need for multiple spreadsheets and rekeying of data, there is no data ambiguity in the contract, risk or claim. This means that parties in a contract will each see the same version of the data. This creates a ‘single version of the truth’ at any point in time.
The technology can further automate generation of technical accounts with correct tax schedules and premium allocations.
4. Blockchain can help optimise performance
The blockchain has a full audit history which acts as a system of record to help both brokers and carriers optimise their performance. The history is where it logs an audit trail of every action performed so there is a level of transparency and governance.
For the broker who owns the facility, the blockchain can measure the response times of carriers and use this to drive the performance of the facility.
For the carriers who participate, the blockchain ledger provides a real-time measurement of capacity. The insurer can assess how much of their allocated capacity remains available for the facility and manage risk appetite accordingly.
5. Enables growth in new markets and new products
As mentioned, the efficiencies gained through blockchain technology multiply with scale. By creating a secure, incorruptible network where everyone is operating on a ‘single version of the truth’, blockchain can serve as an enabler for new products and geographic growth.
The network can be leveraged by brokers to distribute more products and penetrate new markets, utilising the common working standards developed through blockchain.
Any short-term pain incurred by the cost of investing in these types of solutions will be far outweighed by the long-term gains that can be achieved.
Facilities were born out of the need to improve speed and efficiency, and blockchain tools such as ChainThat’s facilities solution ensure they can deliver on this promise. The deployment of tools such as these remove the frictional costs between the operational partners within facilities and deliver the improvements in data quality that can enable these platforms to grow.