Big IT companies and developers have increased their association with problem-solving. As the connections between cross-sector actors get progressively closer, reading or hearing about AI, algorithms, and blockchain has become an integral part of the current debate on how to make our society more efficient, safer, and more secure.
The maritime sector and the insurance industry are no exceptions. Blockchain is set to bring irreversible changes to how we manage risk, assets, and capital in an environment that moves toward the digital sphere.
In many cases, the association between the blockchain technology and financial topics comes almost naturally. KSI Blockchain, developed by the Estonian company Guardtime has already been implemented in production systems in 2012 to ensure the authenticity of the electronic data in Estonian government’s networks. The public sector benefitted immensely from the adoption of such technology in terms of security and cost-efficiency. As the private sector and, more specifically, the marine and insurance industries shift towards a similar path, we spoke to President of Guardtime Estonia, Martin Ruubel, to get to know more about the salient features of this new, ground-breaking change.
For such a revolutionary system to see the light, building a strong network of partners becomes fundamental. Guardtime joined forces with:
- Ernst & Young (EY) — a global leader in assurance, tax, transaction and advisory services;
- Møller- Maersk — the world’s largest shipping company;
- MS Amlin —a leading specialty insurer operating in 25 locations across the world;
- Willis Towers Watson — a global advisory, broking and solutions company;
- XL Catlin — a re-insurance companies dealing with property, casualty, etc.;
- ACORD — a non-profit association active in the insurance industry for the improvement of data quality and information exchange;
- Microsoft — provider of the Azure global cloud.
The project, as Martin Ruubel explains, wasn’t built in a day: “Guardtime and EY jointly published their first insurance related blockchain white paper back in 2015”. Then, in June 2016, “we started out with a brainstorming session specifically for the InsurWave platform, where we identified a large number of inefficiencies related to reconciliation for accounts, tax calculations, declarations, and foreign exchange; as well as many other areas where a lack of data or lack of timely information reduce the ability of the insurance industry to deploy capital effectively”, Ruubel says.
InsurWave has the capability to “assure participants in a multinational insurance program that they all have access to the same information at the same time and that this information is delivered digitally, quickly, and provides a much richer view of the risks and servicing activities than what is currently available”, Ruubel elaborates.
“By standardizing an insurance contract into structured data and implementing it as a smart contract, it’s possible to eliminate large amounts of manual work relating to reconciliation and foreign exchange calculations. This ultimately will allow us to automate the netting and settlement of payments. Overall, the costs associated with the above amount to nearly 20% of gross premiums – in a multibillion dollar specialty insurance market”, as it emerged from our conversation with the President of Guardtime Estonia.
However, between making proofs of concept (PoC) and actually implementing a product in a highly regulated industry, it is inevitable to meet various obstacles such as, “non-functional requirements for the insurance industry, which honestly was not surprising, at all”, Ruubel says. Guardtime will likely be the first the company to do such work – at least on a large scale.
Despite the challenges that any revolutionary technology finds before its full implementation, the insurance landscape of the future looks pretty exciting: “We believe that in a few years, we will look back at the current process which is six months of work to renew a year-long contract as only a painful memory. There will be a much higher degree of automation, and payments for claims and premiums will be much faster and more accurate. Lines of business that are not profitable today, will be restored due to massive cost savings. We also foresee new products and ways of obtaining and pricing insurance will result, and though it’s harder to predict how these might look like exactly, we feel we will play a large role in enabling them for our partners in the industry”, Ruubel confidently states.
It is highly likely that most part of the marine industry will be positively affected by the changes introduced by the implementation of Guardtime’s blockchain platform for insurance-related matters. Currently, as Martin Ruubel explains, “we have Maersk’s Hull and War program on the InsurWave platform, which includes around 800 of their ships. This program includes their broker, Willis Towers Watson, and their primary insurer, GARD, as well as their reinsurance panel. We plan to onboard about 60% of the worlds shipping capacity in the next year, as well as their brokers, insurers and reinsurers”.
Mike Gault, Guardtime’s CEO, assured that implementing the KSI blockchain stack can solve a number of other real-world customer problems, but Guardtime is not the only company dealing with blockchain. The difference lies in how the topics are addressed, something that will surely come up in the future developments of these solutions in other relevant industries. Martin Ruubel puts his finger on it:
“there is no shortage of people talking about changing everything everywhere with blockchain technology, so we’d like to distinguish ourselves by actually knowing what we talk about first. And preferably also having something to show for.
It is absolutely true, though, that the inadequate level of automation and interoperability due to the lack of trust and transparency is a real-world business problem in many verticals, manifesting itself as a massive inefficiency – or an equally massive opportunity for a competitive advantage, new products, and business models. No doubt there will be more news coming from Guardtime aiming to tackle these deficiencies in a number of different domains, together with different domain experts”.