The realm of blockchain technology is affording new opportunities for growth and optimization globally in the processing of financial transactions, and now a new prototype has been developed and is being successfully used in the captive insurance market.
The prototype, developed and implemented by Allianz Global Corporate & Specialty (AGCS) in cooperation with Ernst & Young, Citi Treasury and Trade Solutions, and Ginetta, has successfully passed trial runs for global transactions and is expected to greatly improve efficiency, accuracy and response time for capital insurance technology. These benefits come with the additional advantage of data protection that is virtually hack-proof.
Issues that have been pervasive in the past with captive insurance technology have ranged from the issuance of policies to receiving payments for premiums to the processing of claims. In order to understand how blockchain technology can resolve the issues, it is important to understand the basics of how this new technology works.
What is Blockchain Technology?
Imagine a spreadsheet accessible to multiple computers at the same time. Now, imagine that one of the computer users changes or adds something to the spreadsheet. In a blockchain, the information is immediately visible to the other users in the group. It does not rely on someone saving the data and then uploading or emailing the spreadsheet to anyone else.
The advantages afforded by blockchain technology are innumerable for smaller insurance companies needing access to time-sensitive information as expediently as possible. For instance, a warehouse damaged or destroyed by fire in Ecuador can cost its company tens of thousands of dollars in lost revenue while waiting for the insurance company to settle the claim via email communications or uploaded documents.
Using the new blockchain prototype, these smaller insurance companies can communicate and process claims for their clients much faster and help keep the losses incurred to an absolute minimum.
Why Captive Insurance Programs?
Of the various types of commercial insurance programs on the market, captive insurance programs are among the most complex. Established by companies enjoined across several nationalities, these companies are self-insured rather than insured through the purchase of coverage. The word “captive” comes from the fact that these companies earmark assets that are pooled together as a form of a cooperative that funds the program. They collect premiums and pay out claims as they are received and processed.
The complexity of the captive insurance program’s structure is the driving force behind the applicability of the blockchain prototype for improved administration and claims processing. Utilizing blockchain technology as the captive insurance technology platform may very well be the future of the industry.