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The three companies specifically chose multinational insurance coverage, a particularly complex area of commercial insurance, to better understand blockchain’s potential to reduce friction and increase trust in other areas of the insurance value chain.
AIG said the blockchain solution “creates a new level of trust and transparency in the underwriting process, enabling AIG and Standard Chartered to execute multinational coverage more efficiently”.
The three companies took a multinational, controlled master policy written in the UK, together with three local policies in the US, Singapore and Kenya, and converted them into a smart contract that is able to provide a shared view of policy data and documentation in real time. It also allows coverage and premium payment at the local and master level to be viewed, as well as automated notifications to network participants following payment events. Third parties in the network, such as brokers, auditors and other stakeholders, can also be included and gain a customised view of policy and payment data and documentation.
The multinational ‘master policy’ is written out of London and for the pilot, three local policies were chosen that cover the US, Kenya and Singapore. According to AIG, these three jurisdictions were chosen because the US is a large and complex market, Singapore is a growth market for Standard Chartered, and Kenya has a specific regulatory requirement, known as ‘cash before cover’, which means that cover must be paid for before it is valid.
Emily Jenner, head of insurable operational risk at Standard Chartered, said: “We chose these three territories because of their importance to Standard Chartered and also because of their regulatory complexity, so that we could fully test how blockchain technology might make these contracts work more efficiently.”
Blockchain has the ability to provide a single view of data across all participants while simultaneously providing selective visibility to participants based on their credentials. “It provides the ability to record and track events and associated payments in each country related to the insurance policy,” said AIG. “No one party can modify, delete or even append any record without the consensus from others on the network. This level of transparency helps reduce fraud and errors, as well as the need for the parties to contact each other to view policy and payment data and the status of policies.”
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