American International Group, IBM and Standard Chartered Bank have successfully piloted what they say is the first multinational, “smart contract”-based insurance policy using blockchain.
Utilizing blockchain creates a new level of trust and transparency in the underwriting process, the companies said, which enables them to execute multinational coverage more efficiently.
“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,” said Rob Schimek, CEO of Commercial for AIG.
The pilot was built by IBM and is based on Hyperledger Fabric, a blockchain framework and one of the Hyperledger projects hosted by The Linux Foundation. Working together, AIG, Standard Chartered and IBM converted a multinational, controlled master policy written in the U.K. and three local policies in the U.S., Singapore and Kenya into a “smart contract” that provides a shared view of policy data and documentation in real time. Third parties in the network, such as brokers, auditors and other stakeholders, can also be included, giving them a customized view of policy and payment data and documentation.
The companies said the three local jurisdictions were chosen because the U.S. 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 cover must be paid for before it is valid.
How blockchain works:
- Blockchain, an immutable, security rich and transparent shared digital ledger, provides a single view for all participants while simultaneously providing selective visibility based on 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 consensus from others on the network.
- This level of transparency helps reduce fraud and errors, as well as the need for parties to contact each other to view policy and payment data and the status of policies.