Reinsurance industry could save $5 billion with blockchain
Reinsurers are in line to build some of the biggest blockchain applications outside the payments sector with the potential to save $5-10 billion in costs, says a new report from PwC.
PwC’s report shows that blockchain has huge potential to transform the reinsurance industry, given the amount of data flowing between clients, brokers, reinsurers and outsource service providers. PwC estimates that, by simplifying reconciliation and multiple data entries, blockchain solutions could remove 15-20% of expenses from the reinsurance industry, delivering $5-10 billion of savings.
The report shows that blockchain technology can speed up claims processing verification. It can also allow primary insurers to cede/ retrocede risk using an application specifically designed to process treaties, notify all parties and process premium and commission payments.
Potential wins from blockchain in reinsurance:
- Processing – using blockchain to remove task duplication and multiple rekeying of data
- New business – the industry has already seen pilots in the catastrophe swap market and PwC expects blockchain to support entry into new markets and products
- Transparency – if all underlying risks are on a blockchain, the reinsurer can more accurately identify and quantify the risks that are to be protected by reinsurance. Effectively information on the underlying risks can be aggregated onto a reinsurance blockchain so all information, documents and transactions flow into the contract.PwC has been working on a number of proof of concept applications to demonstrate the potential for blockchain within insurance and reinsurance and how the technology could be applied in practice. We believe it’s important to show that blockchain applications not only work but provide the right solutions to important business problems.
Stephen O’Hearn, PwC’s global insurance leader, commented:
“Blockchain technology is still a new and uncertain area for reinsurers but those who are able to quickly build, assess and refine their applications will differentiate themselves. At a time when companies are searching for cost savings, the potential of blockchain to vastly improve efficiency and accuracy cannot be ignored.”