Blockchain, NFTs, Cryptocurrency – these are all terms originating from more or less the same revolutionary technology that has been taking the financial sector by storm.
But what exactly is it?
Blockchain technology is a decentralized digital ledger that allows two parties to make transactions and record them in real-time securely. Imagine you have a file of transactions on your computer, and two other accountants have the same file on theirs. When you make a transaction, your computer sends an email to each accountant to inform them. They both rush to be the first to check whether you can afford it. The first checks and validates and transmits their logic for verifying the transaction. If the other accountant agrees, everyone updates their file.
This is enabled by blockchain technology where each “block” contains a set of such transactions or data. And a chain of many blocks is therefore called a blockchain.
Blockchain technology makes it easier to verify and share data, reducing the costs and time involved in repetitive operations. For the insurance industry, this technology has begun changing how insurers do business by:
All these mainly result in major cost reduction which can then help insurers better price their products which ultimately benefits the customer.
In 2016, a group of insurers established a consortium called the Blockchain Insurance Industry Initiative pool (B3i) to enable experimentation with the potential blockchain solutions. In 2022, two of the B3i’s founding members Swiss Re and Allianz placed the world’s first blockchain enabled legally binding reinsurance contract via B3i’s live production network.
The blockchain market is booming and is expected to grow by 57% by 2026. The research firm Markets and Markets stated the turnover of blockchain business increased from 241.9 million USD in 2016 to 7683.7 million USD in 2022.
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