Don't write blockchain's obituary just yet

If you read Gartner’s recent chief information officer survey on blockchain, you may have been as surprised by the results as I was. For all the hype around the promise of blockchain to create business efficiencies, it appears CIOs have serious reservations about dipping their toes into Distributed Ledger Technology.

Of over 3,000 CIOs surveyed, only 1% had any kind of blockchain adoption within their organization. To make matter worse, 43% said the technology is on their radar, but they had no plans to test, develop or deploy it, and another 34% said they had no interest in the technology. Those figures aren’t a typo: 77% with either no interest in or immediate plans for blockchain.

So is everything we’ve been hearing around the promise and benefits of blockchain really much ado about nothing?

Insurance opportunities, challenges

When you look specifically at insurance, we still see tremendous opportunities and use cases for insurers who invest in and pilot blockchain solutions.

There are some obvious challenges though, including developing and integrating the technology, connecting all the relevant stakeholders involved in insurance transactions, and finding a high-volume of transactions to make a blockchain investment worthwhile.

Unlike banking and capital markets, which are amenable to blockchain because they have established exchanges that can have their economics radicalized though Distributed Ledger Technology, those types of exchanges don’t exist naturally in insurance. As a result, most insurers are stuck offering their customers a new product that works off a smart contract enabled by blockchain as opposed to a blockchain solution with multiple companies involved.

As insurers expand their ecosystems and partner with non-insurers and other insurers, blockchain will play a key role in creating, scaling, and managing business relationships through its ability to hold partners accountable without the need to first build trust. Insurers will be challenged to maintain a higher volume of partnerships than ever before, and rapidly pivot between partners without sacrificing the integrity or security of their products and services.

Stronger digital network

Blockchain creates a connected tissue between players in the ecosystem, and the participants don’t have to share onerous administration systems and architecture. And it does this with a level of security that is unmatched by other technologies.

One of the main things that will enable insurers to more easily embrace blockchain in the future is a strong focus on open architecture and microservices so that blockchain can be accessed through these means. Many modern technologies really require a rethink of architecture, and open architecture will enable more partnerships which are essential to leverage the full benefits of blockchain.

Blockchain remains one of the most transformative technologies since the advent of the internet and has the potential to revolutionize how insurance business gets done. All insurers should be experimenting with blockchain and make it part of their architecture stack.

Encouragingly, our recent research shows that nearly half (46 percent) expect to integrate blockchain into their systems in two years or less, while a whopping 84 percent of insurers say blockchain-based ledgers and smart contracts are reinventing the way they engage with new partners.

Those insurers who are reticent would be wise to embrace blockchain now as opposed to finding themselves on their back feet in a few year’s time. In this era of heightened digital disruption, the future belongs to those who are fearless and willing to embrace innovative technology. Why risk being on the wrong side of history?

Michael Costonis is the global insurance practice lead at Accenture. This contributor can be contacted through the Accenture website.

The opinions here are the writer’s own.

See also:

The state of insurance technology in 2018

Technology shifts the economics of insurance lead acquisition