Although marine insurance is one of the oldest and most traditional branches of the insurance world, it is about to take a big step into the future with the introduction of blockchain contracts. Following a five-month proof of concept, EY and Guardtime, in collaboration with AP Moller-Maersk A/S, ACORD, Microsoft, MS Amlin, Willis Towers Watson and XL Catlin has announced the sector’s first ever blockchain platform. The plan is for the platform to be implemented from 2018 onwards, and the phased roll-out will begin with use on contracts for a limited number of vessels and routes before expanding its reach to the wider industry.
Blockchain was first invented by Satoshi Nakamoto in 2008, and is a continually-growing list of records, linked and securely encrypted. 2019 saw its implementation as one of the core components of the cryptocurrency BitCoin, allowing it to become the first digital currency to overcome the problem of double spending- a problem in many digital currencies whereby a unit can be falsified or copied, allowing it to be spent more than once- without recourse to a central server.
Being a shared, encrypted database, blockchain allows users to update transactions and contracts in several places at once and in real-time. The new scheme is designed to cut down on paperwork, reduce delays and simplify disputes, and is positioned to hopefully add significan value to the global marine insurance market.
Interviewed by CNBC a week before the announcement, EY’s global insurance leader Shaun Crawford said the reason they had specifically chosen marine insurance as the first venue for their new venture was because the sector displayed a “complete inefficiency” in the sector, with contracts being signed multiple times, from ship to ship and port to port, and the administrative burdens and amount of unnecessary paperwork were just too high to function effectively.
It is hoped that by simplifying the process and allowing information to be transmitted and verified in real time, this paperwork will be drastically reduced and administration should begin to run far more smoothly, which can only be a good thing, not only for insurers themselves, but for their clients, who will no longer have to be kept waiting for so long while an unwieldy paper trail is followed.
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