Fitch Ratings announced today that it views blockchain as a potential long-term game-changing technology for the insurance industry.
In a special report “Blockchain and Insurance – The Trust Machine,” published on Wednesday, Fitch represented the potential benefits, risks and uncertainties regarding blockchain’s application to the insurance industry.
The report states that benefits from blockchain 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. As such, we do not see blockchain affecting insurer ratings over the short to intermediate term.”
According to the report, the insurance industry is taking tentative steps to explore the technology. Fitch experts also call insurance industry “a fertile ground for blockchain’s capabilities”.
“Efficiencies and cost reductions could be achieved by reducing the need for reconciliation and audits, automating certain processes and improving access to data. Estimates of the potential savings for the global (re)insurance industry from Pricewaterhouse Coopers and B3i, an insurance industry trade group focusing on blockchain, range from 15% to 30% of annual current expenses. “
At the same time Fitch report is talking about uncertainties around blockchain.
“When and how much blockchain will be adopted remain major unknowns. Part of the challenge is that investment costs relative to benefits are uncertain, and there are numerous legal, regulatory and security issues that need to be addressed to facilitate wide-scale adoption. There is also no particular urgent crisis that blockchain would address to necessitate immediate application.”
The report concludes 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.