The Blockchain Imperative: The Next Challenge for P&C Carriers

The Blockchain Imperative:
The Next Challenge for
P&C Carriers
Blockchain offers a trusted, unalterable platform for
recording and distributing transactions within an
impenetrable, self-governing and transparent environment
for the insurance industry.

2 KEEP CHALLENGING November 2016
Executive Summary
The increase in Internet connectivity across enterprise and consumer
markets has set the stage for a significant advancement in digital
technology. Blockchain, a universal ledger and data-storage platform,
dramatically cuts the time, costs and exposures associated with
processing and verifying transactions. Blockchain innovations and
strategies are expected to transform the way assets are tracked and
managed by allowing the direct exchange of tangible and intangible
assets within a self-organizing, “air-tight” system that cannot be
manipulated. This is a significant departure from the status quo.
The infrastructure needed to support blockchain applications and
services is currently under construction. As the technology matures,
we expect to see blockchain-enabled companies bring its economies
and possibilities into mainstream applications. Trailblazers such as
Google and Amazon have made significant investments in this space.
Financial services leaders, including Bank of America, Santander
and Goldman Sachs, are already reporting short-term value
from blockchain applications. Government, healthcare and retail
organizations are also experimenting with blockchain technology.
And many start-ups are building blockchain solutions and consortia.

THE BLOCKCHAIN IMPERATIVE: THE NEXT CHALLENGE FOR P&C CARRIERS 3
The most prominent example is R3, a consortium of approximately
45 financial institutions that are working together to study blockchain
usage.1
Property and Casualty (P&C) insurance companies have not sat idly.
Faced with increasingly tough competition, carriers have ratcheted up
their investments in digital platforms and applications to acquire and
retain customers, heighten operational efficiencies, and grow profits in
the most cost-effective way. We believe that blockchain will be key in
helping carriers achieve and sustain these objectives well into the future.
This white paper delves into cross-industry experimentation with
blockchain and its implications for P&C carriers in four key areas. As
with any technology initiative, carriers face some significant barriers,
including a shortage of talent and technological know-how, a lack
of clarity on regulatory impacts and, perhaps most important, the
absence of a robust, insurance-specific platform. With that in mind, we
recommend a three-pronged innovation framework carriers can use
when exploring and implementing blockchain technologies.

Demystifying Blockchain Technology
Blockchain first emerged as the underlying technology and shared public ledger
for recording bitcoin network transactions. The goal was to create a trusted,
peer-to-peer currency system that would operate independently – invulnerable
to political and economic fluctuations, and exchangeable throughout the world
without intermediaries. Over time, bitcoin gained wider acceptance beyond its
role as a cryptocurrency. This led to significant advancements in blockchain for
mainstream enterprise applications across industries.
So what is blockchain technology?
Blockchain is an independent, universal digital ledger for recording all trans-
actions or digital events executed by participating parties. Blockchain’s core
technology uses cryptography as well as distributed database architecture
and a peer-to-peer protocol to create shared ledgers among different parties.
Each transaction in the ledger is verified via consensus of participants in this
ecosystem. Once captured, the information in the blockchain is immutable –
meaning it cannot be manipulated or erased. The distributed ledger chronologi-
cally stores information in “blocks” containing a verifiable record of every single
transaction, as well as the sequence in which the transactions were executed
(see Figure 1, next page).
What makes blockchain so unique is
the absence of a central authority or
third party to monitor, manage and
validate transactions. Traditionally,
transactions such as money transfers
or stock purchases required a separate
entity to oversee and record these
actvities. In a blockchain, in order to
perform any transaction accepted by
the rest of the network, a participant must show “proof of work” – a mechanism
for protecting the integrity of information and preventing fraud.
Blockchains can be characterized by the following:
• Decentralized data.
• Mutual consensus by participants.
• Use of cryptography.
• Digital signature for identity verification.
• Strict controls and time-stamped data.
• Direct, secure and immediate access to data (public or private blockchain) and
transactions (permission-less or permissioned blockchain).
Once captured, information in
the blockchain is immutable
– meaning it cannot be
manipulated or erased.

The Evolution of Blockchain
Blockchain technology gained prominence as a platform for bitcoin. Since then,
its capabilities have advanced significantly – affording seemingly endless oppor-
tunities for employing blockchains along an evolutionary path (see Figure 2,
next page). Currently, applications include:
• Cryptocurrencies & Global Payments: The concept of blockchain paved the way
for bitcoin and other digital currencies (cryptocurrencies) that rely on encryption
techniques to regulate the generation of funds and verify the transfer of those
monies without the need for an intermediary. This platform can drive down costs,
assure “locked-in” integrity and security, and simplify cross-border transactions.
• Value Ecosystems: Data related to any asset is shared on a blockchain for other
participants to ingest. Assets can be tangible (vehicle and property titles, jewelry,
art) or intangible (intellectual property, copyrights, licenses). For example, patient
health care records can be placed and distributed on a dedicated blockchain –
giving physicians, nurses and other authorized parties immediate access to vital
information as needed. All in a secure, unalterable and transparent environment.
• Smart Contracts: Business rules stored on the blockchain verify, enforce, nego-
tiate and track the performance of a contract between parties, with no human
intervention. If an unexpected event (triggering event) occurs, corresponding
rules are automatically executed. For example, a smart travel insurance contract
can automatically initiate and pay out claims when there is a flight cancellation,
using information (flight schedule, weather) stored on separate blockchains.
This eliminates the need for intermediaries, and assures that all transactions are
transparent, efficient and accurate.
Figure 1
How Blockchains Work
• Parties exchange
value – currencies,
contracts, data.
• The transaction
message includes
details about the
receiver’s public key,
the value of the
transaction, and a
cryptographic digital
signature that proves
the authenticity of the
transaction.
• Blockchain nodes
(computers/servers)
on the network
receive the message
and authenticate the
digital signature.
• The authenticated
transaction is verified
instantly and placed in
a “pool”’ of pending
transactions.
• The pending
transactions are
placed in a “block”
by one of the nodes
on the network and
validated.
• At a specific time
interval, the node
broadcasts the block
to the entire
network.
• The miner mines/
verifies the block; a
proof of work is also
created and published
to indicate the mining.
• If all transactions
and proof of work
are validated, the
new block is
“chained” onto the
blockchain.
• The new state of the
ledger is broadcast
to all nodes on the
network.
New
Block
Transaction
Initiation
Transaction
Intake
Block
Creation
Block
Mining
Block
Chaining

• Decentralized autonomous organizations (DAO): In this scenario, a group of
smart contracts work in tandem. Crowd-funding companies and banks are al-
ready showing interest in DAOs. For example, Arcade City, a DAO-based ride
sharing platform, competes with similar platforms, such as Uber and Lyft, us-
ing a decentralized model where driver onboarding, ride-matching and ride pay-
ments are managed by multiple smart contracts.
2
This removes the processing/
transaction overheads and “intermediary layer” found in traditional centralized
decision-making models – a benefit that can translate into lower prices for ser-
vices rendered.
Blockchain Industry Applications
As blockchain adds more capabilities, its underlying ledger system becomes more
dynamic and self-governing/self-organizing. Although adoption is yet to become
mainstream, several industries are exploring how blockchain technologies can be
used to transform their business model and change their operating assumptions.
• Banking and financial services: As noted earlier, the banking industry pio-
neered the use of blockchain. In theory, blockchain can streamline banks’ and
other financial institutions’ processes by automating multi-party payment clear-
ances. Major banks and financial companies such as Bank of America, Santander,
Barclays, Goldman Sachs and NASDAQ are piloting the technology’s capabilities
in data registry and smart contracts for cross-border payments, remittances, mi-
cropayments, trade finance, loans, securities and derivatives trading. For exam-
Figure 2
Blockchain Advancements & Capabilities
• Sophisticated form of smart contracts that
allows the execution and interconnection
of a variety of such contracts.
• Smart contracts interact with one another
in a decentralized and distributed manner
to carry out and coordinate functions.
Example: Everledger (Diamond data)
BitHealth (Healthcare data)Example: Bitcoin (Cryptocurrency)
BitShares (Cryptocurrency)
Example: Filament (IoT)
PlayCoin (Gaming)
SMART
CONTRACTS
• Modular, repeatable and
autonomous scripts or computer code
stored on a particular node within a
blockchain. Capable of executing the
script/code upon a designed trigger.
• Public ledger to register information on
tangible/intangible assets.
• Accessed by authorized users as needed.
3
VALUE
ECOSYSTEMS
21
CRYPTO–CURRENCIES &
GLOBAL PAYMENTS
• The digital representation of value that is neither
issued by a central bank nor a public authority.
• Can be transferred, stored or traded electronically.
DECENTRALIZED
AUTONOMOUS
ORGANIZATIONS
4
Example: Otonomos (Financial instruments)
Mirror (Financial investments)

ple, Barclays is testing derivatives trading on a blockchain.
3
Similarly, NASDAQ
is building several services on its blockchain, including the issuance of pre-IPO
shares. It is also developing exchanges such as securities trading clearinghouses
and central securities depositories.
4
In addition to making stand-alone invest-
ments, a number of banks have joined hands to form a blockchain consortium,
R3, focused on identifying and prototyping new hypotheses and developing
blockchain technology standards.
5
• Government: Several government agencies across the globe plan to move
publicly available information – land titles, vehicle titles and health records, for
example – onto a blockchain to make it easier to manage and access. The State
of Delaware announced a blockchain initiative to encourage businesses incorpo-
rated in the state to use distributed ledgers and smart contracts.
6
One of the key
objectives is to improve the tracking of equities issued and shareholder rights
following multiple financing rounds. In another case, a new Australian political
party has proposed a real-time, token-based voting system based on the concept
of decentralized blockchain technology.
7
Registered voters use the blockchain-
based application to vote on issues in parliamentary proceedings.
• Healthcare: Organizations in healthcare are gearing up to use blockchain tech-
nology to store healthcare records
that are tamper-resistant and impos-
sible to replicate – enabling all autho-
rized parties to quickly find and act
on vital information. Philips Health-
care, a Netherlands-based healthcare
giant, has partnered with blockchain
specialist Gem to build a private
blockchain that will aid in the de-
velopment of enterprise healthcare
applications.
8
HealthNautica, a leading cloud-based software company in the
healthcare sector, announced its partnership with blockchain provider Factom to
secure medical records and audit trails on a blockchain.
9
• Technology: In addition to the industries above, global technology giants such
as Google, Microsoft and IBM are already staking their claim in this space.
Google is experimenting with blockchain to enable users to access platforms
and services without the need for a password.
10
Microsoft launched blockchain
as a service platform and ready-made environment where developers can ex-
periment with blockchain.
11
IBM is introducing the capabilities of blockchain to
its artificially intelligent computer, Watson.
12
Organizations across industries are experimenting with blockchain to determine
how it can be leveraged to disrupt current business models, increase profitable
growth, and enable more efficient operations. These initiatives put the onus on the
insurance industry to follow suit.
Blockchain & Insurance
In our view, blockchain can potentially eradicate many of the P&C insurance
industry’s most critical business challenges.
A number of P&C carriers (e.g., Lloyds of London
13
, Allianz
14
) are already exploring
blockchain applications in areas such as customer acquisition and retention;
product development; underwriting/pricing; claims; and expense and profitability
management.
It is important to understand that blockchain supports any type of unstructured
In our view, blockchain can potentially
eradicate many of the P&C insurance
industry’s most critical business
challenges.

data (including from third parties). It can
also store and retrieve virtually unlimited
amounts of data in an encrypted, time-
stamped and decentralized format that is
unalterable.
As blockchain gains traction, personal and
commercial lines carriers will draw benefits
from this game-changing technology
platform. We expect that the initial focus
will be on attaining operational efficiencies
and reducing expense ratios in payment processing, data storage/infrastruc-
ture, or leveraging third-party data on a blockchain. The latter can include MVR
(Motor Vehicle Reports); CLUE (Comprehensive Loss Underwriting Exchange)
reports; OFAC (Office of Foreign Assets Control) reports; and ISO (Insurance
Services Office) claims or loss runs.
Carriers that build these capabilities will be better positioned to price policies
competitively and increase revenue – particularly in personal lines and small
commercial markets where price is a key determinant in wins. Over time,
blockchain will help carriers derive revenue through:
• The use of smart contracts.
• More effective and efficient insurance processing and multi-party collabora-
tion.
• Faster payment processing by eliminating intermediaries.
• New business models (peer-to-peer insurance and risk pools).
The concept of smart contracts is extremely compelling to carriers, given
the potential to transform and optimize processes. Typically, most insurance
core functions are viewed as contracts between various stakeholders (agent
contracts, vendor contracts, insured policy contracts and reinsurance contracts,
as shown in Figure 3, next page).
Blockchain-based smart contracts can help carriers react immediately by
automating several tasks. For example, imagine an insured policy contract
that settles claims in near-realtime up to a certain threshold. The contract can
perform real-time checks using publicly and privately available information to
determine a triggering event (e.g., a catastrophe in a particular area, images of
the area, and the cost of repairs) then automatically settle the claim. Germany-
based insurance giant Allianz has reported its success in using blockchain-based
smart contracts to automatically process its catastrophe swaps and bonds,
which are triggered under predefined conditions.15
Several market-changing trends, such the sharing economy (read “The Sharing
Economy: Implications for Property and Casualty Insurers,” the Internet of
Things (read “The Internet of Things: P&C Carriers & The Power of Digital”)
and the increase in open application platforms allow carriers to quickly and
Use Case #1:
Adoption of Smart Contracts
Over time, blockchain will help
carriers derive revenue from new
business models such as
peer-to-peer insurance and
risk pools.

easily connect to digital ecosystems – underscoring the importance and
value of processing high-volume, repetitive tasks (e.g., pay per transaction in
sharing-economy and usage-based policies; real-time loss prevention and claims
processing with smart devices and sensors). Additionally, in their attempts to
expand market share, carriers are exploring products such as micro insurance,
which entails the payment of premiums in small increments. Smart contracts
enable carriers to manage large transaction volumes in an automated, efficient
and “fail-safe” manner. For example, LenderBot is a proof-of-concept micro-
insurance platform that uses the bitcoin blockchain to insure numerous products
and services in the sharing economy.
16
Down the road, smart devices in vehicles, homes, appliances and machines will
use smart contracts to monitor performance thresholds and estimate the cost
of damage in the event of accidents – eliminating the need for in-person claims
assessment. Consider a smart boiler covered under a smart policy contract for
equipment breakdown. The boiler would automatically detect a breach, estimate
the damage, trigger the smart policy contract, and request maintenance from
the designated service provider.
Figure 3
How Smart Contracts Impact Insurance Business Processes
DISTRIBUTION
MANAGEMENT
UNDERWRITING &
POLICY ADMINISTRATION
CLAIMS
MANAGEMENT
• Smart agent contracts (e.g.,
billing, commissions/
incentive payouts, licensing,
terminations)
• Smart contracts for simpler
products and sharing economy
(e.g., micro insurance, pay-per-
transaction)
• Smart contract-based policy
administration (e.g., automated
renewals, cancellations.
endorsement processing,
premium audit, risk engineering)
• Smart reinsurance contracts
• Smart contract-based claims
processing (e.g., automated
FNOL, multi-party claims
workflows and claims payouts)
• Smart service providers/
vendor contracts (e.g., billing,
payments, terminations)
Smart devices in vehicles, homes, appliances and
machines will use smart contracts to monitor
performance thresholds and estimate the cost of
damage in the event of accidents.

Carriers’ success in optimizing processes has traditionally centered on data.
Across the insurance spectrum – from operations, distribution, underwriting
and policy administration, to billing, claims, reinsurance and finance processes –
ever-increasing amounts of information are stored and exchanged. Consequent-
ly, carriers continuously look for new and better ways to capture customer and
risk information from the Web, mobile devices, social media and sensor data.
Carriers depend heavily on third-party reports, such as (MVR, CLUE, OFAC and
court records) for data pre-fill and to refine underwriting, pricing, and claims
management. While these sources help carriers expand their knowledge and
improve accuracy, the process is expensive, due to the non-standardized fee
structure and the need to develop numerous partnerships to gain access to
third-party data. The adoption of blockchain by various internal and external
sources would generate data from a single true source, which would be far more
cost-effective for carriers. Figure 4 depicts common insurance processes that
involve multi-party data-sharing and collaboration.
Use Case #2:
Effective Processing & Multi-Party Collaboration
Figure 4
Collaborative Processing on a Blockchain: The Potential
DISTRIBUTION
MANAGEMENT
• Access complete information
on customers from multiple
channels (internal and
external).
• Access larger markets/
syndicates/excess and surplus
markets for complex risks.
• Access larger markets for
collateralized assets (e.g., CAT
bonds) and raising capital.
• Collaborate with third-party
information sources (e.g.,
MVR, D&B, loss history) for
effective underwriting and
pricing.
• Share customer and policy
information with customers,
agent/brokers, reinsurers,
risk-engineering specialists.
• Collaborate with service
providers, share claims
information to determine
fraud and accelerate
investigation.
• Share claims status with
agents/brokers, customers,
account executives and
service providers.
• Share regulatory and
statistical reporting (State
DOI, ISO, NCCI, NAIC) and
avoid intermediaries where
possible.
REPORTINGUNDERWRITING &
CLAIMS
MANAGEMENT
Blockchain’s innate immutability
and distributed ledger promise greater
data integrity and a single version
of the truth.

Blockchain may well become the principal repository for information pertaining
to property and vehicle titles, business licenses, building permits and annual
reports, for example – eliminating the need to rely on various sources. As of
this writing, several blockchain startups have invested in public blockchains to
manage the purchase of high-net-worth items such as antiques, luxury items,
diamonds, gold, fine arts and jewelry. Everledger, a leading blockchain provider,
has established relationships with major certificate houses across the globe to
create a detailed digital record of diamonds on a blockchain, each with a unique
identification code. The company has already registered more than 850,000
diamonds to reduce diamond fraud.
17
Carriers can integrate with these public
blockchains to verify and access information, and improve underwriting and
claims management.
When it comes to managing data across far-flung enterprise IT environments,
blockchain comes into play. By moving data on customers, policies, claims and
agents to a blockchain, Social Security numbers, credit card information and
other sensitive data can be stored in a decrypted, secure format that cannot
be replicated or tampered with, and is essentially immune to cyber-attacks and
data breaches. Many other data-rich industries, such as banking and retail, have
partnered with providers of blockchain distributed ledger technologies to move
their data onto the blockchain. At this time, several major banks, including JP
Morgan, BBVA, and Credit Suisse have joined the R3 consortium (a blockchain
technology company) to decentralize financial information via blockchain.
18
In addition to impenetrable security and cost-effective storage, blockchains
allow for easier and more efficient data-sharing among insurance industry
stakeholders – a critical requirement in businesses where core processes call for
close collaboration among various players (reinsurers, agents/brokers, service
providers, regulators and customers).
Blockchains have the capability to open access to a larger marketplace, specifi-
cally for complex risks that are handled by syndicates, risk pools, and excess and
surplus markets. Blockchain technologies can also help carriers tap into a wider
market of investors for presenting collateralized assets (e.g., CAT Bonds) to pro-
spective buyers and raising capital. The encrypted nature of blockchain makes it
especially well-suited for these types of activities.
Blockchain’s innate immutability and distributed ledger promise greater data
integrity and a single version of the truth.
Payment processing is an integral part of insurance, especially when it comes
to premiums, commissions and claims payments among customers, agents/
brokers, and vendors. Carriers have taken several measures to ensure faster
payment processing through payment solutions such as mobile payment, social
media payment, mobile wallet, debit cards, and electronic funds transfer (EFT).
While these new methods have made it easier to complete payments, intermedi-
aries’ (e.g., banks, vendors) service fees and clearance times remain a challenge.
These issues are more significant in commercial insurance transactions, where
payments are in thousands of dollars or involve multiple countries where
payments must be settled in the local currency.
Use Case #3:
Faster Payment Processing, Eliminating Intermediaries

Blockchain offers a better way to address carriers’ payment-related challenges
– promising faster processing (instant payments), real-time clearance and
posting of funds with confirmation. Payments are authorized within the
network itself, without a central authority – drastically reducing payment costs.
International and cross-border payments are easily enabled through blockchain’s
distributed ledger. (See Figure 5).
Many insurance companies and insure-tech startups are toying with the idea of
peer-to-peer insurance or risk pools-based business models. Already, a few ventures
formed worldwide are managing risk pools for parties with similar needs. Currently,
these include Friendsurance (Germany), Guevara (UK), Lemonade (U.S.), Inspeer
(France), PeerCover (New Zealand) and TongJuBao (China).
Blockchain has the potential to redefine the peer-to-peer insurance model and
advance it to the next stage with the ability to:
• Pool geographically dispersed parties into a common marketplace.
• Govern smart contracts (decentralized autonomous organization) and consensus
management in the areas of risk-pool management, underwriting, and claims
payments.
• Access carriers/reinsurers that can provide the necessary coverage for excess/
reinsurance layers beyond what the risk pool can cover.
• Store and manage premiums/assets in a blockchain digital wallet.
These self-governing activities are a step closer to achieving a mutual insurance
model. Companies can conceptualize a secure blockchain network comprising a
pool of insureds using a common digital wallet to store pooled money as a cryp-
tocurrency. The funds in that wallet can be spent only if the insured member and
majority of members in the risk pool vote for it. Similarly, the voting consensus
Use Case #4:
New Business Models: Peer-to-Peer Insurance & Risk Pools
Figure 5
Payment Functions Enabled by Blockchain
DISTRIBUTION
MANAGEMENT
• Process agent/broker
commissions.
• Process agent/broker
incentives.
• Process premium receivables at
the start of new business, during
renewals, or during financial
endorsements.
• Process premium refunds during
cancellations.
• Process third-party vendor
payments (risk engineers,
premium auditors) immediately.
• Process claims payments
instantly.
• Process service provider/
vendor payments
immediately.
UNDERWRITING &
CLAIMS
MANAGEMENT

among members will drive the risk coefficient of the new entrant and, correspond-
ingly, the share of the premium or claims payout to be paid. Companies such as
Teambrella
19
are already investing in and creating variations of this model.
Beyond product design, carriers can apply peer-to-peer concepts to develop market-
wide collaboration models on blockchain platforms, bringing in external parties as
needed. Examples include collaboration between vendors or service providers during
claims handling; between carriers during subrogation of liability claims; or with
reinsurers to place re-insurable risks. The immutability aspect of the blockchain helps
ensure data integrity and a trusted record of interactions among multiple parties.
A Parade of Challenges
Blockchain technology has the potential to upend if not transform industries,
including insurance. However, before it can become mainstream, there are
numerous challenges to overcome. Among them:
• A lack of talent and technology know-how. A key challenge associated with
blockchain is a lack of awareness of the technology and how it works. The skills
required to implement blockchains are often beyond the traditional IT skill sets
insurance carriers have today. Thus, it is imperative for carriers to understand
how others – competitors and peers – have implemented blockchain, and make
sure they gain equivalent knowledge of blockchain applications.
• The absence of industry standards and an industry-specific platform. As car-
riers consider how and where to implement one or more blockchain initiatives,
they will face two major issues: a lack of industry standards and the need for a
Quick Take
As blockchain becomes mainstream, it could poten-
tially – and significantly – transform the Internet of
Things (IoT), the connected world of devices, vehicles,
buildings and other entities instrumented with sensors,
software, and network connectivity. The ability to place
IoT assets on a blockchain will help address important
IoT roadblocks around centralization, availability,
privacy, authentication and storage.
Once IoT information is available on a blockchain,
all stakeholders (e.g., device manufacturers, service
providers, insurance companies, consumers) can, if
permissioned, access the information as required –
eliminating the need to partner with multiple parties
within the IOT ecosystem. And with its capability to
verify each and every transaction, the blockchain can
alleviate concerns over hacking and privacy.
Imagine a world where smart refrigerators are
registered onto a universal blockchain and all the
details (e.g., parts information, assembly information,
service history) about them is tracked on a blockchain
from inception – simplifying maintenance, product
recalls and product/software upgrades. Additionally,
as part of the blockchain the refrigerators can monitor
and report the contents that are stored, solicit bids
from grocery stores, and pay for the delivery of new
items – automatically.
Applying blockchain technology and thinking to the
world of IoT is perhaps the much-needed silver lining
that could help expedite the adoption of what has been
termed “The Internet of Value.”
Blockchain & the Internet of Things

sturdy, insurance-based platform – neither of which can be resolved in isolation.
A critical number of leading P&C carriers need to form a consortium and create a
system for developing standards for data formats, and exchanging protocols and
encryption processes designed specifically for insurance.
• A lack of clarity on regulatory impacts. Since blockchain technology is still at
the nascent stage, regulations (what information can be stored on the blockchain;
who should be able to access the information; deciding if data should be stored
anywhere in the world) have yet to mature. In an industry where multiple regula-
tory agencies and industry associations will likely have concerns and questions,
it is crucial for carriers to understand current regulations and their implications,
identify gaps, and confirm actions to take before embarking on this journey.
From Concept to Reality: Taking Blockchain
to the Next Level
Blockchain has the potential to significantly alter the way carriers operate. Yet given
that only a handful of these companies are testing the waters, the technology has yet
to achieve widespread adoption. As of this writing, Aegon, Allianz, Munich Re, Swiss
Re and Zurich have formed a consortium (Blockchain Insurance Industry Initiative
B3i) aimed at conceptualizing, prototyping and testing blockchain-based use cases
applicable for insurance. They have begun piloting a proof-of-concept for inter-
group retrocessions.
20
We believe that the time is ripe for insurance carriers to start
thinking about, exploring and experimenting with blockchain. With this in mind, we
recommend a three-phase adoption framework (as outlined in Figure 6 above).
Figure 6
The First Steps
DEFINE
• Understand the blockchain
ecosystem and potential
applications in P&C insurance.
• Identify the target line of business
(e.g., personal, commercial) and
business function (e.g., sales and
distribution, underwriting, policy
administration, claims, billing).
• Develop hypotheses to solve
business problems; prioritize the
hypotheses.
• Evaluate blockchain entry models to
explore – in-house, partnerships,
investment.
• Perform a market scan to identify
blockchain providers and
integrators.
• Evaluate blockchain providers and
explore partnership options for the
prototype phase.
• Develop use cases for the
prototype, based on the chosen
hypotheses.
• Develop business case for the
chosen scenario.
• Start small by quickly ideating,
prototyping and validating the
selected hypothesis with business
and technical users.
• Modify the prototype based on
feedback; update product and
service concepts as needed.
EXPLORE
-
• Based on prototypes results,
establish partnerships with
respective blockchain providers;
outline the cost structure.
• Develop the business case,
considering the revised scale of
business; define key performance
measures to monitor success.
• Develop measurable/achievable
roadmaps; determine operational
and technology
requirements/investments.
• Analyze regulatory impact; proceed
with larger-scale pilots.
SCALE

Moving Forward
As carriers begin to explore and experiment with blockchain, they can turn to
well-known entry models for partnerships, in-house development or making
investments. For example, as an investment, Santander created a venture fund to
invest in blockchain startups such as Ripple and Digital Asset Holdings.
21
In terms
of in-house development, Citibank created Citicoin cryptocurrency in-house.
22
From a partnership perspective, UBS and Clearmatics partnered to create a
securities settlement system.
23
Realizing the potential of blockchain requires being open to change, and a willing-
ness to invest in new technologies and talent. We recommend a “test and learn”
approach, and continuous experimentation to stay in touch with key developments
over time.
Footnotes
1 “R3 blockchain consortium sheds light on Concord project,” Finextra.com, August
2016. https://www.finextra.com/newsarticle/29351/r3-blockchain-consortium-
sheds-light-on-concord-project/.
2 “Decentralized Uber Arcade City”: “We Will Submit a DAO Proposal,”
bitcoin.com, May 2016. https://news.bitcoin.com/decentralized-uber-
arcade-city-use-dao/?utm_source=facebook&utm_medium=social&utm_
campaign=SocialWarfare.
3 “Barclays used blockchain tech to trade derivatives,” http://www.ambankers.net/
article/26694/barclays-used-blockchain-tech-to-trade-derivatives.
4 “Nasdaq Opens Blockchain Services to Global Exchange Partners,”
coindesk.com, May 2016. http://www.coindesk.com/nasdaqs-blockchain-ser-
vices-global-exchange/.
5 “Meet the 25 Banks Working with Distributed Ledger Startup R3,” coindesk.com,
November 2015. http://www.coindesk.com/meet-the-25-banks-working-with-distrib-
uted-ledger-startup-r3/.
6 “State of Delaware Unveils Blockchain Initiative to Leverage Potential of Smart
Contracts,” Prnewswire.com, April 2016. http://www.prnewswire.com/news-releas-
es/state-of-delaware-unveils-blockchain-initiative-to-leverage-potential-of-smart-
contracts-300245870.html.
7 “New Australian Political Party Seeks to Popularize Blockchain Voting,”
coindesk.com, February 2016. http://www.coindesk.com/australian-political-party-
blockchain-voting/.
8 “Gem Partners with Philips for Blockchain Healthcare Initiative,” coindesk.com,
April 2016. http://www.coindesk.com/gem-philips-blockchain-healthcare/.
9 “Factom’s Latest Partnership Takes on US Healthcare,” Cointelegraph.com, April
2015. https://cointelegraph.com/news/factoms-latest-partnership-takes-on-us-
healthcare/.
10 “The Blockchain Will Help Google Improve Their Authentication Services,”
Botcoin.com, December 2015. https://news.bitcoin.com/blockchain-will-help-
google-improve-authentication-services/.
11 “Microsoft blockchain-as-a-service gains momentum with banking partnership,”
Techrepublic.com, April 2016. http://www.techrepublic.com/article/microsoft-block-
chain-as-a-service-gains-momentum-with-banking-partnership/.
12 “IBM Watson is Working to Bring AI to the Blockchain,” coindesk.com, April 2016.
http://www.coindesk.com/ibm-watson-artificial-intelligence-blockchain/.

13 “Lloyd’s Sees Blockchain’s Potential for Insurance Markets,” coindesk.com,
November 2015. http://www.coindesk.com/lloyds-sees-blockchains-potential-insur-
ance-markets/.
14 “Allianz Tests Blockchain to Boost Catastrophe Bond Trades,” coindesk.com, June
2016. http://www.coindesk.com/allianz-blockchain-smart-contracts-boost-catastro-
phe-bond-trading/.
15 Ibid.
16 “LenderBot by Deloitte and Stratumn to bring insurance to the sharing economy
using bitcoin’s blockchain,” Bravenewcoin.com, July 2016. http://bravenewcoin.
com/news/lenderbot-by-deloitte-and-stratumn-to-bring-insurance-to-the-sharing-
economy-using-bitcoins-blockchain/.
17 “Everledger and the immutable protection of provenance through the block chain,”
Dailyfintech.com, July 2015. https://dailyfintech.com/2015/07/23/everledger-and-
the-immutable-protection-of-provenance-through-the-block-chain/.
18 “Meet the 25 Banks Working with Distributed Ledger Startup R3,” coindesk.com,
November 2015. http://www.coindesk.com/meet-the-25-banks-working-with-distrib-
uted-ledger-startup-r3/.
19 “Teambrella – A PeertoPeer Insurance System Using Bitcoin,” blockchain.com,
May 2016. http://www.the-blockchain.com/2016/05/09/white-paper-teambrella-
peer%C2%AD-to%C2%AD-peer-insurance-system-using-bitcoin/.
20 “Insurers Launch New Blockchain Consortium – B3i,” blockchain.com, October
2016. http://www.the-blockchain.com/2016/10/19/insurers-launch-blockchain-new-
initiative-b3i/.
21 “
Santander’s added $100m to its fintech venture fund,” Cityam.com, July 2016,
http://www.cityam.com/245684/santanders-added-100m-its-fintech-venture-fund/.
22 “Codename Citicoin: Banking giant built three internal blockchains to test Bitcoin
technology,” Ibtimes.co.uk, July 2015. http://www.ibtimes.co.uk/codename-citicoin-
banking-giant-built-three-internal-blockchains-test-bitcoin-technology-1508759/.
23 “UBS Blockchain Partner Clearmatics Taps Investors for Funds,” Bloomberg.com,
November 2015. https://www.bloomberg.com/news/articles/2015-11-18/ubs-block-
chain-partner-clearmatics-raises-funds-for-digital-coin/.

About the Authors
Agil Francis is a Senior Principal/Senior Director with Cognizant Business Con-
sulting’s Insurance Practice. Agil has 12-plus years of management consulting
experience in the insurance industry, where he has advised senior executives on
strategy, operations and technology issues across sales/marketing, distribution,
underwriting and claims. Agil can be reached at Agil.Francis@cognizant.com |
LinkedIn: https://www.linkedin.com/in/agil-francis-86322537
Vikas Jain is a Senior Manager with Cognizant Business Consulting’s Insurance
Practice. He has 15 years of management consulting experience in the insurance
industry, where he advises senior executives on strategy, operations and trans-
formation issues across underwriting, claims and distribution functions. Vikas can
be reached at Vikas.Jain@cognizant.com | LinkedIn: https://www.linkedin.com/in/
vikas-jain-b02a0724
Gauthaman Krishnamurthy is a Senior Manager within Cognizant Business Con-
sulting’s Insurance Practice. Gauthaman specializes in the P&C industry, and has 11
years of business consulting and program management experience, advising clients
on operations and technology issues across marketing/distribution, underwriting,
policy administration and claims. Gauthaman can be reached at Gauthaman.Krish-
namurthy@cognizant.com | LinkedIn: http://www.linkedin.com/pub/gauthaman-
krishnamurthy-ains-api/4/1b/b83
Vinodh Stanley Stephen is a Senior Consultant within Cognizant Business
Consulting focused on the insurance industry. Vinodh has over six years of business
consulting experience in the insurance industry, working with senior executives on
process transformation, IT systems modernization, digital strategies, and roadmap
definitions across underwriting, claims and distribution within the personal and
commercial space. Vinodh can be reached at Vinodhstanley.Stephen@cognizant.
com | LinkedIn: https://www.linkedin.com/in/vinodh-stanley-stephen-50206218
Acknowledgments
As part of our research and brainstorming, the authors would like to thank Satish
Venkatesan (Senior Director and Innovation Experience Center Lead) and Sinoj
Gopal (Senior Director and Senior Client Partner) from our insurance business unit
for their valuable insights on this topic.

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Consulting offers high-value digital business and IT consulting
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About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information
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