Unlocking the Potential
Blockchain is the key to insurance ecosystem transformation.
- Jim Bramblet and Matt Lehman
- December 2019
Insurers are excited by the prospect of blockchain technology. The market for blockchain in the insurance industry is expected to grow from $64.5 million in 2018 to $1.39 billion by 2023 at a compound annual growth rate of 84.9%, according to Reuters estimates.
Despite the industry hype, however, most early blockchain proofs of concept did not deliver the value that organizations expected, and many insurers were unsure how to take them into production.
That's not to say those proofs of concept haven't been valuable. Failure has helped insurers understand the most promising ways to use blockchain technology. It also birthed a range of enterprise-friendly blockchain platforms and helped insurers realize the ultimate potential of blockchain as a catalyst for insurers to build out their ecosystem opportunities.
An ecosystem is a network of cross-industry players who work together to define, build and execute market-creating customer and consumer solutions. They are defined by the depth and breadth of potential collaboration among a set of players, and each can deliver a piece of the consumer solution or contribute a necessary capability.
Despite enthusiasm and a desire to compete through ecosystems, insurers are falling short on having the right capabilities, culture and technologies to fully exploit ecosystem opportunities. Less than 5% of insurers are “ecosystem masters,” or companies with the right attributes to disrupt their industry-using ecosystems and that plan to lead as many ecosystems as possible, according to Accenture research. This ranks insurance second-to-last among the dozen of industries analyzed in terms of the number of ecosystem masters.
Blockchain is the technology solution most likely to help insurers fully exploit these emerging opportunities. Industry players understand that collaboration and partnerships present the best opportunity to unlock the value of blockchain and are pushing their network of partners to align behind the technology. Additionally, blockchain could potentially shift the cost curve through revenue growth and cost reduction if insurers team up to redefine how they engage with each other and their customers, partners and broader ecosystems.
Such technologies are also better suited to new, emerging models of collaboration, with insurance organizations seeing the real value of blockchain in its ability to enable different parties to share a unified view of the core information that drives an ecosystem. Providing a single source of truth allows friction in business processes to be drastically reduced, using solutions such as smart contracts to facilitate and automate blockchain networks.
There are three reasons why now is the right time to embrace blockchain to pursue ecosystem opportunities.
• The growing maturity of software platforms, including R3 Corda, Hyperledger Fabric, Project Concord, Digital Asset and Quorum, which are now ready to support production-grade blockchain solutions.
• Blockchain is ideal to unlock needed cost efficiencies against today's backdrop of slow or flat industry growth forecasts.
• Blockchain investment has shifted from public, permissionless networks to private, permissioned networks such as Corda and Hyperledger Fabric. At this stage of evolution, these types of platforms are proving to be the best fit with evolving enterprise requirements around data, security and risk, especially as blockchain networks move to live production.
By working together to determine how their market may benefit from an industrywide solution and how to share the costs of ideation and development, insurance organizations can lay a foundation for the distributed, and collaborative, economy of the future.
Blockchain's true power does not lie only in unlocking internal operating efficiencies but also in its potential to transform entire insurance markets and ecosystems.
Best’s Review contributors: Jim Bramblet is the North American Insurance practice lead and Matt Lehman is the P&C claims practice lead at Accenture. They can be reached at email@example.com.