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14 May 18 21:02

(The Insurance World Could Be, I Mean)

I love reading things that broaden my horizons, teach me something and make me better in the process, and one of my favorite books in this arena is Tom Friedman's "The World is Flat". In fact I remember being fascinated by the flattening of everything (via globalization, as described in the book), so much so that I find myself now undergoing a similar fascination with Blockchain technology and its flattening implications for the world of healthcare.

You might recognize Blockchain in the context of crypto-currencies like Bitcoin and others but what is lesser understood is the technology itself. Moreover, its implications to the world of business are not generally talked about enough, getting lost in the fervor of stock market (and crypto-currency price) swings. To add the proverbial insult to injury, Blockchain and its potential to disrupt paper and process-heavy transactional industries like insurance (including health insurance as well as others) is quite significant. So let me offer some thoughts and implications about Blockchain in this arena:
In a word, "Transactions". How would you like to lower transactional costs, improve transactional efficiencies (and trust in them) while decreasing susceptibilities, particularly in a world of minimum loss ratios (MLR)?

There will be detractors of course, but how about eradicating the need to keep multiple versions of the truth, where everyone keeps and trusts "their copy" of something while throwing that same thing over the wall to someone else (usually by email) who also keeps and trusts "their copy" too.

How about looking at all this in a flat, secure, distributed manner like the old days when you opened up a paper map of the world and spread it across a table to get a world view? If paper maps are too old for you to remember, then how about globalization or the internet and their flattening and disruptive approaches to transactions? SharePoint?

It is hard to talk about Blockchain in this context without talking about contracts – specifically, smart contracts. Think about this not so much as a piece of paper (as we know contracts today) but rather as a logical record of who did what, when, and how. Everyone agrees to this logical record and it is also verified by the organizations or participants involved. Combined with Blockchain technology that provides an auditable log of who did what and when, you now have the potential for both data assurance/security and process assurance/security….all in a flat distributed ledger without the need for multiple versions of everything.

Applying this to the business world and process-heavy industries (like insurance) in particular, one can then more easily grasp its potential impact on costs, labor etc. Imagine processes like enrollment, premium payment, claims, and provider information management. How cumbersome are they for you today? Do you get your ID card and/or money quickly enough without complications? Probably not. I am by no means suggesting that Blockchain is a panacea for all that ails the administrative processes in industries like insurance. However, I am suggesting that we recognize the disruptive potential Blockchain has, particularly in terms of reducing intermediaries and the size of accounting teams, among others. Additionally, cutting fraud, waste and abuse (due to its secure, irreversibly-locked and synchronized
record of transactions) especially in industries like healthcare and others, could really be attractive.

While large scale Blockchain implementation is perhaps still some time away, the coming months and years will certainly give us more empirical evidence of Blockchain's true potential. It will also undoubtedly take even longer for us to realize its full implications (just like globalization) but for now, let me close with a quote from Tom Friedman's book that feels appropriate to me: "Honey, I think the world is flat"….the insurance world could be, I mean.

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Location: USA


Richard Phipps - 2 Jun 2018, 8:02 a.m.

Thanks for sharing your views on the opportunities of Blockchain / Distributed Ledger Technology Rajiv!
I’m proud to say that Swiss Re has been experimenting with this transformative technology since 2016. Great progress has been made to date, helping think about the insurance value chain with a fresh approach. In addition, these business-lead initiatives are encouraging platform development beyond ‘Beta’ towards true production operation. Exciting times ahead for businesses and customers alike.

Rajiv Sood - 6 Jun 2018, 3:25 p.m.

Thanks for your comment Richard. I agree that progress has been made and we are just at the exciting beginning stages of it all, in the grand scheme of things. From my vantage point, Blockchain will first have an impact on areas like property cat and other relatively binary outcomes. Next may be parametric areas. Other more complicated and nuanced areas like Medical will take a bit longer and in this realm, the impact is likely to be first on areas like credentialing where you have multiple payers all doing the same thing (trying to validate a provider's credentials) independently. Having said all this, all parties in the transaction (cedent, broker, reinsurer etc.) will need to be on the same page to successfully navigate it seamlessly. Plus, people will need to get over the mindset that it is "their data" because they will have to share some of it for this all to work properly to its potential.

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