The insurance industry is uniquely positioned to benefit from blockchain technology in addressing its competitive challenges, according to research from McKinsey & Company.
In its report, Blockchain in insurance – opportunity or threat?, McKinsey said blockchains can be used as a system of static record keeping, and as a dynamic registry for the exchange of assets and payments as well as for the verification of dynamic information.
"Blockchain is a digitisation technology that could be of strategic interest for insurers," the report said.
"[It] can address the competitive challenges many incumbents face, including poor customer engagement, limited growth in mature markets, and the trends of digitisation."
McKinsey recognises three ways in which blockchain can facilitate growth for insurers: improving customer engagement, enabling cost-efficient product offerings for emerging markets, and enabling the development of insurance products related to the Internet of Things (IoT).
"Blockchain promises unique potential for insurers to efficiently serve emerging markets with P2P micro-insurances, develop products for the IoT market, or reliably share data from and with other parties for improvements in, for example, fraud detection or automation of claims handling," the report said.
"For the industry as a whole, this means starting to work with consortia, technology experts for start-ups, regulators, and other market participants to identify the challenges around blockchain’s open and decentralised nature."
However, McKinsey notes that industry-wide implementation is still a long way off.
"This is because blockchain is functioning as a distributed system and, thus, its value mostly depends on collaboration with competitors, suppliers, or others," it said.