Blockchain Proof of Concept on Certificate of Insurance

Brokers are facing fundamental questions about how they make their activities fit for an evolving technology landscape in the 21st century. Can the risk placement process be optimised to improve efficiency, speed and client satisfaction? And can they add value to markets and placing brokers, and in turn, the end insured?

As a step towards addressing these questions, ChainThat has collaborated with RFIB Group Ltd (the independent international insurance and reinsurance broker) on a blockchain proof of concept enabling the distribution of digital risks across markets, brokers, and insureds. The shared data enables the on-demand generation of proof of insurance certificates to the insured on behalf of local brokers and begins to underpin a truly digital risk ecosystem.

The introduction of the electronic placement mandate has made progress in modernising placement into Lloyd’s and is helping to increase efficiency in placing risks and in turn improving customer service. Looking to build on this, the proof of concept was extended to use Whitespace’s placement platform to provide the capability to initiate the placing process with a digital Market Reform Contract (MRC) which can be presented to the markets for quoting, negotiating, and signing: all the while giving end users a great user experience.

On completing the contract set-up, ChainThat’s blockchain-enabled platform is leveraged to share the contract data, so that a single version of the truth is enforced between the counterparties on the risk (placing broker, insurer(s), local broker and the insured). Once the contract is on the distributed ledger, the ChainThat platform greatly simplifies key activities including generating insurance certificates, technical accounting and settlement, as well as Claims First Notification of Loss

“We had been working with Whitespace to support the launch of their digital risk placing platform and, separately, exploring with ChainThat potential use cases for blockchain. We realised there was an opportunity to integrate these two technologies to form a single pilot to try and address some of the market challenges”
Angus Kennedy, CIO, RFIB Group

Instant Certificates of Insurance

With Distributed Ledger Technology, the processes around requesting, generating, notifying and accessing certificates of insurance are logged as transactions by ChainThat’s application so all parties in the contract have consistent visibility and an audit trail of the transactions. The certificates are generated instantly: benefiting both brokers and their clients.

For brokers, this will mean they are able to provide clients with instant documentation which allows them to go about their business. This reduces the risks of errors and omissions, and the ability to produce this information on demand will be valuable in the audit process.

For their clients, the immediate issuance of a certificate means they will have the information to hand – literally, in the case of mobile apps - to confirm they continue to be compliant with contractual insurance requirements for the service they are providing.

Today’s process of generating certificates, on the other hand, is detached from placing since certificates are typically generated and issued, often in paper format, separately by the local broker, given the lack of data-sharing from the placed MRC.

Angus Kennedy, CIO of RFIB Group, said:
“In the absence of data federation, there are manual touchpoints in the process which cause unnecessary errors and omissions. It’s unnecessary friction in the process from when a contract is signed in the Lloyd’s market to when the local broker issues proof of insurance. The issue is just compounded when there are many participants in the value chain, and there are ongoing changes in the contract, endorsements, risk coverage etc.”

Post-Bind Efficiency

The work ChainThat and RFIB are doing highlights how the benefits of blockchain extend to all within the insurance value chain and do not stop once a risk has been bound. In terms of claims, insureds (i.e. claimants) can provide first notification of loss by directly informing the carriers, while brokers are kept in the loop of the loss event. Using distributed ledger technology, agreement and processing of claims can happen between the insurers, brokers and third-party loss adjustors while the insured is always kept informed about the latest activities on their claim. This significantly reduces the processing times of the claim and enhances customer experience.

E-Placement Interoperability and Straight Through processing

With distributed ledger technology, e-placement interoperability can be achieved – out of the box - by federating the contract data across the counterparties during the pre-bind process. Placement enablers such as Whitespace have been proven to accurately digitize contract data which can then be passed to the blockchain. Each counterparty or node is then a single access point for consumption of this data post-bind which can be ingested into each counterparty’s back-office systems to achieve straight-through processing

Clearly there is more work to be done to fully deliver the benefits that blockchain can bring to all the participants in the insurance value chain, but a proof of concept project, like that undertaken by ChainThat and RFIB, points the way forward for the industry to make progress.

David Edwards