Study by The Institutes RiskStream Collaborative Reveals Blockchain Applications Could Save Insurance Industry Millions
MALVERN, Pa., August 13, 2019 /PRNewswire-PRWeb/ -- The Institutes RiskStream Collaborative(TM), the first blockchain consortium for the risk management, property-casualty insurance, and life insurance and annuity industries, revealed research that illustrates the powerful cost- and time-saving efficiencies that blockchain and distributed ledger technology (DLT) applications can bring the insurance industry.
The RiskStream Collaborative's analysis looked specifically at how a consortium-based approach to blockchain can support two events common in property and casualty insurance: proof of insurance and first notice of loss following an accident, both in personal auto lines.
"By implementing blockchain applications in the U.S. market, and taking the RiskStream Collaborative's network growth into account, members could save between $19 million and $68 million in the first year of use, between $60 million and $190 million in year two, and between $99 million and $277 million in year three," said Pat Schmid, vice president of The Institutes RiskStream Collaborative.
First Notice of Loss
First notice of loss is traditionally a highly manual process coordinated by each involved insurer. Implementing a centrally coordinated blockchain-based process could lead to as much as $14.4 million in savings in claims intake and a $28.8 million savings in data-sharing costs. Altogether, applying blockchain to this traditionally slow, manual process could save the industry as much as $43 million per year.
Additionally, blockchain-based processes could save claims handlers nearly 1.5 million hours each year, time currently spent on data sharing between carriers and claims-information intake.
"Today's first notice of loss process is complex, inefficient, slow and expensive for the wide range of parties involved," said Christopher McDaniel, president of The Institutes RiskStream Collaborative. "With more than 8 million personal auto claims filed each year in the U.S., blockchain can remove countless steps in this equation while reducing costs and providing a better customer experience."
Proof of Insurance
Demonstrating proof of insurance (POI) is another area ripe for blockchain disruption. Currently, the POI process is cumbersome and fraught with opportunity for information error and fraud. The RiskStream Collaborative's study found that a blockchain POI application could reduce the industry's data-storage costs by as much as $2.8 million per year. And by reducing the need for paper insurance cards, the industry could save up to an additional $4.5 million a year in printing costs.
Complying with the various states' insurance-verification systems, each of which may have a different style or data standards, presents a significant burden and cost to insurance companies. According to the report, these could be reduced by up to $70 million annually. Finally, roughly 13 percent of all motorists in the U.S. are uninsured. RiskStream Collaborative's blockchain application may be able to moderately reduce the costs of uninsured driving by up to $12.3 million annually.
In total, taking into account conservative assumptions on network growth, the analysis found that blockchain applications could save membership $9.5 million in the first year of adoption, $34.1 million in the second year and $64.4 million in the third.
The analysis also demonstrated that the new applications could lead to substantial improvements in the customer experience, which often lead to operational savings. The findings showed that even a minor improvement in customer experience associated with these applications could lead to $222 million or more in benefits for RiskStream Collaborative members.
"These findings are only scratching the surface in terms of what blockchain applications can bring the insurance industry," McDaniel continued. "Blockchain can provide insurers with greater trust and auditability, increased automation, lower administrative costs and the complete elimination of fraud. But in order to realize the full potential of these financial and operational benefits, insurance carriers and brokers must continue to come together under a consortium approach, which the RiskStream Collaborative framework provides."
For more information on blockchain, its applications in the insurance industry and the methodology behind the findings in this analysis, visit the following link:
Link: Examining the Benefits of RiskStream's Proof of Insurance and First Notice of Loss Applications
The RiskStream Collaborative's goal is to better serve policyholders and reduce industry and consumer costs by streamlining payments, reducing fraud and improving the accuracy of customer data. Since its inception in 2017, 38 global insurers, reinsurers and brokers have joined. More information, including details on how interested organizations can join, is available at TheInstitutes.org/RiskStream.
About The Institutes
The Institutes, a leading provider of risk management and insurance knowledge solutions, offer 28 professional and associate designations, including the CPCU® program. In addition, The Institutes provide introductory, foundation and leadership programs; online and continuing education courses; custom solutions; and assessment tools.
About The Institutes RiskStream Collaborative
The Institutes RiskStream Collaborative is the risk management and insurance industry's first enterprise-level blockchain consortium that is developing insurance-specific use cases via Canopy, a custom blockchain architecture. The RiskStream Collaborative is committed to equipping organizations to work together to inspire product innovation, enable efficiencies and open new technological frontiers. TheInstitutes.org/RiskStream
SOURCE The Institutes
