AIG and Standard Chartered have successfully piloted the first multinational, “smart contract” based insurance policy using blockchain technology in partnership with IBM.
Blockchain is a type of distributed ledger or decentralized database that keeps records of digital transactions.
The pilot saw a multinational controlled master policy written in London and involving local policies in the US, Kenya and Singapore converted into a "smart contract" using the open-source Hyperledger Fabric protocol that was built by IBM, providing real-time shared views of documents and data.
AIG said that the blockchain solution creates a new level of trust and transparency in the underwriting process of complex multinational coverage, helping to reduce fraud and errors.
The pilot gave participants greater visibility of underwriting coverage and premium payments and also enabled them to be automatically notified about payment events. It also showed that third parties in the network, such as brokers, auditors and other stakeholders, could also be included, giving them a customized view of policy and payment data and documentation.
The aim of the test was to demonstrate the potential for blockchain to reduce friction and increase trust in one of the most complex areas of commercial insurance, multinational risk transfer.
“Our pilot proves blockchain has a powerful role to play in the future of insurance,” remarked AIG commercial CEO Rob Schimek.
“Any technology, including blockchain, that can increase trust and transparency for an industry whose pillars are built on that, should be fully explored,” he added.
Marie Wieck, general manager of IBM Blockchain said that there is a “tremendous opportunity” to transform the insurance industry through the application of advancing blockchain technology.
“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,” she said.