IBM to help AIG simplify insurance products with blockchain technology

AIG and British bank Standard Chartered have completed a pilot project designed to simplify some of the industry's most complex insurance policies using blockchain technology.

A pilot project created by IBM, using the open-source Hyperledger Fabric protocol, has shown that it has completed testing an insurance commercial strategy for local insurance policies in the United States, Kenya and Singapore.

The project demonstrated how to automatically notify parties to a contract about an insured event in real time. This was achieved by moving away from traditional party-to-party interactions and using immediately enforceable smart contracts based on the Fabric blockchain.

Interested participants (including brokers and auditors) were shown insurance coverage from the perspective of the parties to an insurance contract. The project recorded and tracked events that could trigger an insurance payout, while ensuring that no party could change the terms of the insurance coverage “without consensus from others in the network.”

The pilot jurisdictions were selected to represent different aspects of the potential market. In particular, the US market was chosen due to its size and complexity; Singapore was identified as a potential growth market for Standard Chartered; Kenya was chosen because of its unusual regulatory requirements.

While London-based Standard Chartered has been working with blockchain for a long time, and even recently announced its plans to create a blockchain platform for cross-border payments, AIG is just making its debut in the innovative industry.

Insurance has become a prime field for blockchain innovation in the past few months, with more and more participants joining the insurance consortium Blockchain B3i and the Shanghai Insurance Exchange.

MetLife will be the first insurer to join the R3 consortium to use blockchain technology in insurance. The company intends to use blockchain for administration, customer insurance policy management, and database maintenance.

Blockchain technology could reduce costs in the global financial and insurance industry by $110 billion. Blockchain will begin to have a significant impact on the financial services market within the next three years. And in 5 years, experts expect its large-scale implementation.

The technology is expected to have the greatest impact on the cross-border B2B payments sector, and will allow for savings of up to $60 billion. The trade finance sector will also be able to reduce its costs by up to $14 billion by moving away from outdated paper processes.

Blockchain will help companies working in the field of P2P payments, REPO transactions, derivatives calculations, and systems that prevent money laundering save money.

Experts expect that bank investments in blockchain will reach $400 million by 2019.

Source: Forinsurer