EY, Microsoft and Maersk have announced their collaboration to develop Blockchain Technology based platform for marine insurance.
One of the “Big Four” accounting firms, EY plans to bring Blockchain Technology to marine insurance. In this venture, EY has collaborated with Microsoft, A.P Moller-Maersk and others.
Blockchain, the distributed ledger technology, will be used to store information about shipment, risk and liability, and to ensure firms’ compliance with insurance regulation. The technology will also help bring transparency across the interconnected network of clients, insurers, brokers, and other third parties.
EY has decided to use the technology in marine insurance because of a “complete inefficiency” in the sector.
Shaun Crawford, global insurance leader at EY, said:
“The reason we chose marine (insurance) as the starting point for this sort of market is mainly because of its complete inefficiency.”
He further added:
“It’s facing high administrative burdens of managing and writing claims with a lot of paperwork. All contracts are signed multiple times. They go from ship to ship, port to port, through quite a journey.”
Blockchain Technology explained
For the uninitiated, distributed ledgers are clusters of data shared across a decentralized network. In the beginning, Blockchain Technology was built to facilitate transactions of first decentralized cryptocurrency, Bitcoin. But, now experts have realized its potential that goes beyond financial services.
In this context, EY’s Crawford said:
“We’re not talking about a new currency here, we’re not talking about money. We’re talking about data aggregation.”
Maersk on the Blockchain Collaboration:
According to Maersk, the Blockchain platform would help the firm maintain a smoother relationship with the insurance market.
Head of risk and insurance at Maersk, Lars Henneberg, said:
“It is a priority for us to leverage technology to streamline and automate our interaction with the insurance market.”
“Insurance transactions are currently far too tedious and frictional. The distance between risk and capital is simply too far. Blockchain technology has the potential to facilitate the desired development that is long overdue.”
Blockchain technology could have wider implications on the insurance industry
EY reveals, marine industry has relied on traditional physical contracts that get shipped to and fro to different ports for signing.
EY has closely worked with Guardtime, a software security firm, to develop Blockchain platform. Guardtime has detailed that it expects a wider implication of Blockchain after initial marine applications.
Prior to the announcement of consortium, Guardtime CEO, Mike Gault, has said:
“Initially, we focused on marine insurance as it is well-suited to a blockchain solution as it has a complex international ecosystem, with multiple parties, multiple jurisdictions, high transaction volumes and significant levels of reconciliation.”
“But down the line we expect it to be rolled out across other areas of insurance markets — as there are clearly shared benefits and attributes. In fact, blockchain can be applied to any commercial or specialty line of business with high-value assets.”
Blockchain powered by Microsoft Azure
The Blockchain solution was based on Microsoft Azure, Microsoft’s cloud platform. Cloud technology is preferred for storing data and software via the internet rather than on a hard drive.
EY’s digital ledger had its proof of concept ready in March.
EY’s Crawford noted:
“When we built the proof of concept, we built a prototype on Azure to make sure the whole thing worked and is secure, and now what we’re doing is building it.”
“For any new system to be implemented it needs to be built using the right model, one that is robust, scalable and can co-exist with existing IT infrastructure or systems. “That’s what Azure and the cloud technology enables us to do, without comprising performance or flexibility, which is why it was so important to partner with Microsoft.”
Chief technology officer at Microsoft Azure, Mark Russinovish, believes Blockchain has the potential to be “transformational.” He said:
“Microsoft believes blockchain is a transformational technology with the ability to significantly reduce the friction of doing business, especially streamlining business processes shared across multiple organizations.”
He further added: “Marine insurance is a prime example of a complex business process that can be optimized with blockchain.”
EY also has MS Amlin, XL Catlin and insurance industry body ACORD (Association for Cooperative Operations Research and Development) as its partners on this project.
As per reports, the Blockchain implementation will take place January, 2018 onwards.
The race to develop Blockchain enabled platforms has become highly competitive. IBM and various other food industry giants have announced consortium to tackle industry shortcomings.
The EY’s assortment also comes in the light of others making similar moves.
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