What is blockchain? Insurance Business sat down with Karim Derrick, head of research and development at Kennedys, to talk about the new cryptography-based piece of technology and learn why, on the whole, larger firms within the insurance space have been hesitant to embrace it.
Kennedys is one of the primary event partners at Insurance Business’s TechFest in May, that will further explore blockchain in the insurtech sphere.
“My personal view is that, no, blockchain is not very well understood,” Derrick said to Insurance Business. “The fact of the matter is that insurance has been, although it is catching up, quite a long way behind the curve on this.”
Derrick describes the ‘legacy systems’, in terms of technology, that are embedded within large insurers that mean blockchain technology has yet to be embraced as quickly as in other sectors. Similar to ‘legacy airlines’, the larger, older companies, for various reasons, have been slower than their smaller, newer counterparts to embrace technology such as blockchain, and wield themselves off well-established but outdated forms of in-house technology.
Derrick explained that large insurers often use technology and database systems that originate from some generations back, and that there remains a lack of general understanding of those databases themselves – let alone blockchain.
“I don’t think that databases are properly understood in the industry,” he said. “And at the end of the day, blockchain is just a special kind of database.”
Blockchain is described by Blockgeeks as “a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity – and each of these blocks of data is secured and bound to each other using cryptographic principles.” Effectively it is a new form of database for what is becoming an increasingly new, technology-driven world of work.
Derrick explained to Insurance Business that one explanation for the apparent reluctance to understand and utilise blockchain is to do with its association with bitcoin.
“For whatever reason, bitcoin has dominated the headlines and blockchain was the cryptocurrency enabler,” Derrick explained. “The two have been tied together – and there is a circus around it and all the bluster it has created.”
But leading insurers would do well, and there have been previous efforts along these lines, to understand the benefits blockchain can bring, and then fully utilise those benefits.
“If you think about it, insurance itself has some problems that blockchain can really address,” explained Derrick. “Fraud is the obvious one – because criminals often exploit existing gaps in databases.” Blockchain could provide a solution to that – with firms being able to manage their own databases without exposing books to anyone, but at the same time still benefiting from the common data system.
“Claims going into the blockchain can be maintained by individual insurers and used without necessarily exposing all their claims to other insurers,” he said. “However, you can still take a new claim from a new claimant and look to see that individual’s claim history, etc.”
Blockchain provides ample opportunities for insurers to complement and improve their existing operations, and while the technology is straightforward, implementing it has not been.
“The technology is simple – it really is,” Derrick said. “Implementing it in areas which have obvious need for it but are well established was always going to be difficult.”
Join us to learn more at our TechFest in May at The Fullerton Hotel in Sydney. Registration is still open.
