Blockchain technology is on everyone's lips. But what makes blockchain so interesting for insurance companies? How does AXA Switzerland use blockchain – and how will the technology change the insurance industry?
In the banking sector, blockchain technology has already made an entry. In the future, it will also impact the insurance industry. According to a recent study by Cognizant, 86% of leaders in the insurance industry believe this technology will be important or very important in the future. A study by Accenture states that almost 50% of insurers will be using blockchain within the next two years. 84% of respondents even think blockchain and smart contracts will completely redefine the interaction with partners.
Insurance companies work with many different players and their value chain is long. Since insurers operate in increasingly complex business ecosystems, the companies concerned must find an efficient way to manage all of these relationships. The aim is to provide a seamless customer experience. It is precisely this complex network of stakeholders that blockchain can coordinate efficiently (see examples below). Thanks to blockchain, different parties find a common denominator and communicate with each other in a simple way.
The main strengths of blockchain:
Anyone who buys a used car knows the problem: As a buyer, you often don't know the condition of a car – how many accidents has it been involved in, are the mileage and the number of repairs correctly stated. The used car industry is characterized by uncertainties and a lack of trust. There are simply too many independent parties involved: vehicle manufacturers, importers, garages, second-hand dealers and portals, vehicle assessors, the Departments of Motor Vehicles, sellers, etc. For example, it's just as simple as it is lucrative for the seller to manipulate the speedometer. But thanks to the Car Dossier there's an end in sight for these nasty tricks: In a digital dossier based on blockchain, all the relevant information from the car's manufacture to its junkyard location is registered (change of ownership, mileage, services, etc.).
Car Dossier has been developed in a collaboration between AdNovum, the University of Zurich, the Lucerne University of Applied Sciences and Arts, AMAG, AXA, Mobility, and the Department of Motor Vehicles of the Canton of Aargau. Car Dossier is based on a private blockchain combined with smart contracts. The advantage for customers is obvious: You can be sure that all the information about the car is correct.
The project is currently forming an association which aims to recruit other partners along the value chain and to develop additional interesting use cases.
AXA wants to look into blockchain solutions increasingly in the future and to implement them where it makes sense to do so. Currently, various projects are running, including in the pensions area.
Switzerland's 3-pillar system has proven itself and is considered to be one of the best in the world despite the challenges it currently faces. But the 3-pillar system is complex: Numerous suppliers are involved, and there are hardly any interfaces between the management applications. The individual pillars in themselves are transparent. However, it becomes complicated if a private individual wants a pensions overview across all three pillars. This requires time-consuming analyses; documents have to be obtained and advice sought. For families, the whole thing is even more complicated.
In order to provide its customers with an overview, AXA is looking into the use of a decentralized pension dossier. The blockchain-supported system would allow private individuals to assess their own pensions data at all involved parties (banks, insurance companies, foundations, Pillar 1 (AHV), employers) with a mouse click and – if they so wish – to forward it to an advisor or fiduciary.
Fizzy is an AXA product that insures flight delays – and is based on blockchain. The claims are processed using smart contracts. Smart contracts can map different functions of the insurer. For example, they automate all the steps from checking the claim to the payout. In an ideal case, all the insurer's processes can be included in the blockchain in the form of programmed code. And this is the case for Fizzy. A prerequisite for such insurance is a functioning ecosystem with different participants. Fizzy uses the public blockchain Ethereum for its processes.
The interesting thing about such blockchain solutions is that trust is decentralized: No one needs worry any longer if an insurer will meet its performance promise if this is already defined in the code.
• No exclusions – in case of a delay, there is always a payment, regardless of the cause (snow, strike, etc.)
• No claim notification required
• The insured sum is transferred to the customer's bank account directly after landing
• No manual intervention – either by the customer or the provider
1. More routes and countries in the offer
2. Easy integration of Fizzy for partners
3. Crypto payments – deposits and withdrawals in ether (the crypto currency of Ethereum)
From the example of Etherisc, it becomes clear how insurtechs are making use of blockchain technology.
At "Blockshow Europe 2017," Etherisc was awarded the Oscar for the "Most Innovative Blockchain Startup." Essentially, Etherisc offers a platform for the development of combined decentralized insurance applications. On a shared infrastructure with product templates and an insurance license as a service, every member within a community can create their own insurance products.
Flight delay insurance from the insurtech Etherisc is already up and running. A hurricane insurance has been implemented on the testnet. In addition, the community is working on many other ideas, such as an application for social insurance.
Practical examples like the Car Dossier show that, in a blockchain-based ecosystem, all parties involved can benefit. One of the biggest challenges goes beyond the technical requirements: Companies must change their way of thinking. Blockchain requires the ability to cooperate, often with competitors. If you want to exclude your competitors, the efficiency gains offered by the technology are limited. The greater the number of players who participate, the better the exploitation of blockchain's potential. This opens up completely new dimensions of cooperation. AXA, in any event, will be staying on the ball in order to bring state-of-the-art and attractive solutions to the market. After all, there'll be no getting round blockchain in the future.