Transforming insurance through the blockchain

While cryptocurrencies have become all the rage when it comes to investment alternatives, the real technology that is set to change industries the world over remains hidden in the background. Jonathan Jardim, senior software developer at SilverBridge, examines how the blockchain will see a fundamental shift take place in the insurance sector.

Essentially, the blockchain is the technology powering cryptocurrencies. It is a distributed database that maintains a continuously growing list of records. These records (also called blocks) are secure from tampering and revision. Each block contains a timestamp and a link to a previous block. By design, blockchains are inherently resistant to modification of the data — once recorded, the data in a block cannot be altered retroactively.

“A blockchain can therefore record transactions between two parties efficiently and in a verifiable and permanent way. With cryptocurrencies like bitcoin (a widespread blockchain protocol), people have a secure and efficient way to buy and sell products and services without ever needing to use a financial institution,” says Jardim.

Insurance benefits

According to PwC, the blockchain has enormous potential to deliver value to financial services. It writes that not only does the blockchain promise cost reduction and improved efficiency, but it could also enable revenue growth as insurers attract new business through higher-quality service.

“In fact, as a vehicle for building trust, reducing costs, and accelerating transactions, there are few technologies more capable than the blockchain. Given how the blockchain makes it easier to create more efficient business networks where anything of value can be tracked and traded, insurers can take over the trust role from a third-party or intermediary,” says Jardim.

This also results in cutting out the middle men and enable insurers and their customers to operate independently, further reducing costs.

“Considering how transactions can be accelerated through blockchain technology using an appropriate consensus algorithm for a group that agrees to work together, the speed improvement in insurance transactions will be significant. With transactions being processed faster while reducing costs and continually engendering trust of one another by working together as a collective, insurers will be able to take a more direct role in their process and claims management. This, in turn, will also allow insurers to charge more competitive rates, passing the savings onto consumers, which will be welcomed during this time of increased financial stress.”

Modernising approaches

In the same PwC study, the firm found that 56 percent of insurance firms surveyed recognised the importance of blockchain. However, 57 percent of those conceded that they did not yet know how to respond.

“South African insurers have to maintain a rapid rate of innovation and ensure they keep pace with what insurtechs are doing. If they are unable or unwilling to leverage technologies like the blockchain then they will lose relevancy amongst a lucrative younger market sector that wants new and different solutions meeting their needs,” he concludes.

About SilverBridge

SilverBridge has over 20 years’ experience as a leading provider of insurance software solutions in the African financial services industry. Our footprint extends to 14 African countries. SilverBridge has introduced an enhanced service offering allowing financial services companies the opportunity to respond quickly to changing markets. With more than 30 customers throughout Africa, SilverBridge has the knowledge, experience, and technology to help its clients do better business.