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Blockchain Is 'game-changing Technology' For Insurance: Fitch Ratings

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Prominent credit rating agency Fitch Ratings thinks blockchain is a "game-changing technology" for the insurance industry over the long term.

In a report published Wednesday, titled "Blockchain and Insurance —The Trust Machine," Fitch Ratings assessed the potential benefits and risks of blockchain's application to the insurance industry.

Benefits could range from significantly reduced operating costs, more accurate customer-specific data, and better risk pricing and improved efficiencies. However, the technology remains unproven, and greater clarity around its advantages and risks will be revealed over the next three to five years. "We do not see blockchain affecting insurer ratings over the short to intermediate term," the report says.

Blockchain, also known as distributed ledger technology, is used in a decentralized path to digitally record and verify a wide range and volume of information relating to commercial transactions. The technology was initially created as part of the bitcoin cryptocurrency network. Blockchain's transparency, security and information storage capacity have recently attracted other industries to explore opportunities to leverage this technology.

Insurance is fertile ground for blockchain's capabilities, according to Fitch. With the industry's large number of complex transactions between multiple parties, blockchain could theoretically offer significant cost reductions, improved processing speed, and enhanced underwriting and pricing, while reducing fraud. Efficiencies and cost reductions could be achieved by reducing the need for reconciliation and audits, automating certain processes and improving access to data.

Pricewaterhouse Coopers and B3i, an insurance industry trade group focusing on blockchain, estimate that by adapting the new generation technology, the global insurance industry could potentially save 15 percent to 30 percent of annual current expenses.

Fitch believes that the ultimate viability of the technology for the insurance industry will depend on a select group of industry leaders adopting blockchain to gain competitive advantages.

by Joji XavierRTTNews Staff Writer

For comments and feedback: contact editorial@rttnews.com

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