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A global Fortune 500 corporation with a captive insurance operation operating in about 100 countries has implemented a blockchain prototype with Allianz Global Corporate & Speciality (AGCS). The prototype showed that with blockchain, international insurance transactions can be significantly accelerated and simplified, the insurer said in a press release.
The insurer’s blockchain then links to Citi’s CitiConnect API which can accept instructions from the Allianz blockchain and disperse payments, beginning with U.S. dollars and eventually extending into other markets and currencies.
“We have a robust innovation program within AGCS,” said Alan Cabello, project lead and innovation manager for AGCS in central and eastern Europe.. “The idea is to prototype and test new technology and new ways of doing business, then put it in front of a customer in a way they can interact with it and give us real feedback.”
The Allianz captive insurance blockchain prototype, built on Hyperledger Fabric 1.0, focuses on two types of insurance policies – professional indemnity and property – for a captive insurance program with local subsidiaries in the US, China and Switzerland. The prototype looks at three common process flows in the captive insurance cycle – annual policy renewals, premium payments and claims submission and settlement. It translates these processes into the distributed ledger environment, decreasing the time from start to policy, policy to premium and claim to settlement.
““Our captive insurance blockchain prototype demonstrates that regular transactions and cash transfer between fronting insurers and clients can be significantly accelerated and simplified,” says Yann Krattiger, principal at Allianz Risk Transfer (ART. “Automated processing replaces the exchange of thousands of emails and massive data files."
Captive insurance programs collect premiums from each of their operating companies and pay out claims internationally as they arise. As a fronting insurer, Allianz partners with the captive owner to administer each program.
Blockchain technology is ready to manage such complexity at a global enterprise now, Cabello said.
“Any international insurance program could benefit from blockchain technology in terms of data quality and communication. This could improve our lives today, not tomorrow or in five years. Communicating and sharing information across geographies is still a complex procedure in a corporate world.”
A captive is especially interesting because it has to centralize all this information under one customer and make sense of it, he added. But now processes that might have taken four months can be finished in four minutes. While blockchain processing is not the fastest in finance — it dawdles compared to high frequency trading, for example — it is fine for the demands of a captive insurance operation where processing large amounts of complex data accurately is more important than raw speed.
“Blockchain delivers most value where there are many intermediaries, because it reduces the need for any specific intermediary,” said Mayank Mishra, global head of digital channel services at Citi. “In most financial services flows there is a party in the middle orchestrating traffic between business participants, but blockchain allows everyone to communicate through the same source so there is no need for any intermediary.”
Although Citi is evaluating blockchain in multiple capacities and has an active participation with Nasdaq for its private market, it interfaces with Allianz through an API, he said. When a business opportunity comes in, Citi looks to see if its existing tools and processes can support it.
“We have clients who are early adopters of blockchain technology,” said Mishra. “We work with them to develop leading solutions but the industry is getting more active in understanding technology and trying out use cases.”
At Allianz, developing a blockchain solution started with design thinking.
Most of the value in moving this self-insurance program to the blockchain was getting into the nitty gritty of the processes, Cabello said.
“Understanding end to end how everything flows and rethinking that to make sense within a blockchain context, most of the value was there. To look at a number of international programs at that level is the hard part; the technology itself enables us to do a couple of good things.”
With a background in design thinking, Cabello said the insurer’s team took a very customer centric approach.
“We sat down with people on our side and on the customer side and observed their day-to-day work, what came into them and what came out. We did dozens of interviews on both sides.”
Allianz worked with Ginetta for the design of the convenient user interface that visualizes core processes, and through real-time information, allows tracking their progress by all relevant participants around the world. Before creating the user interface, all processes of captive insurance management have been reviewed, redefined and radically simplified.
““With blockchain, much focus is put on the technology, yet in reality perhaps 10 percent of the work is related to technology,” said Cabello. “The other 90 percent is rethinking the underlying processes and these in the end are all about people.”
They tested prototypes giving users tasks and recording how they did and where they got lost.
“It was pretty intensive as we looked at the process and how to make it easier to use.” Some large corporate systems can take months of training; Allianz wanted to make the system intuitive.
“This is B2B, but at the end of every B there are people and we need to be very mindful of the people using this, both customers and employee,” he said. “If we make our employees happy that makes customers happy; there is a human at the end of every tool.”
The user experience is particularly important for blockchain because it would be game changing, he added.
“In an ideal world this would replace a number of different tools that speak to each other not too efficiently; the business has a lot of emails and Excel spreadsheets flying back and forth.”
“Emails have created an excess of communication. In a captive you are dealing with hundreds of offices in different languages, so it is complicated. Blockchain will allow us to streamline it. The collaboration with Citi was really important to us because it lets us move real currency. The potential of that in the future could be huge in many different industries and in many different ways.”
