AIG and Standard Chartered Bank have successfully piloted the first multinational, “smart contract” based insurance policy using blockchain, a distributed ledger technology.
The pilot solution was built by IBM and is based on Hyperledger Fabric – a blockchain framework and one of the Hyperledger projects hosted by The Linux Foundation
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Working together, AIG, Standard Chartered and IBM converted a multinational, controlled master policy written in the UK, and three local policies in the US, Singapore and Kenya, into a “smart contract” that provides a shared view of policy data and documentation in real-time.
This also allows visibility into coverage and premium payment at the local and master level as well as automated notifications to network participants following payment events.
The pilot also demonstrates the ability to include third parties in the network, such as brokers, auditors and other stakeholders, giving them a customized view of policy and payment data and documentation.
The three parties chose to execute this initiative in one of the most complicated areas of Commercial Insurance – multinational risk transfer – to better understand blockchain’s potential to reduce friction and increase trust in other areas of the insurance value chain.
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By GlobalDataThe multinational “master policy” is written out of London and for the pilot, three local policies were chosen that cover the US, Kenya and Singapore. These three jurisdictions were chosen because the US is a large and complex market, Singapore is a growth market for Standard Chartered, and Kenya has a specific regulatory requirement, known as “cash before cover” which means that cover must be paid for before it is valid.
Rob Schimek, CEO of commercial, AIG said: “Our pilot proves blockchain has a powerful role to play in the future of insurance. Any technology, including blockchain, that can increase trust and transparency for an industry whose pillars are built on that, should be fully explored. We’re excited to be delivering innovation that matters to our clients – and co-developing key components of this new technology together.”
Marie Wieck, general manager, IBM Blockchain said: “There is tremendous opportunity to apply advancements in blockchain technology to transform the insurance industry. By creatively leveraging smart contracts to help address tough regulatory requirements across different markets, we are seeing the enormous impact blockchain can have to improve efficiency and open up new business models.”
How it works:
- Blockchain, an immutable, security rich and transparent shared digital ledger provides a single view of truth across all participants while simultaneously providing selective visibility to participants based on their credentials.
- It provides the ability to record and track events and associated payments in each country related to the insurance policy.
- No one party can modify, delete or even append any record without the consensus from others on the network.
- This level of transparency helps reduce fraud and errors, as well as the need for the parties to contact each other to view policy and payment data and the status of policies.
