The potential of Blockchain: the engine of economic and social change
The B3i project and its impact on the insurance and reinsurance industry
According to the Word Economic Forum, 65% of children currently in primary education will end up working in professions that, as of now, don’t exist. That is why, in order to prepare for and take this change on board in the most appropriate way, we also need social innovation.
Over the last six months, on top of my everyday work as an underwriter and ‘innoagent’, I have the good fortune to be one of the people responsible for the project B3i (The Blockchain Insurance Industry Initiative) on behalf of our company. Blockchain is the concept and technological platform that facilitates efficient and simple administration in various financial and insurance sectors with a probability factor of close to zero for error and fraud . Which areas of business and management will be affected by this new technology? Banking, Insurance, Reinsurance, Travel, IT, Human Resources, Accounting.
B3i, The Institutes RiskBlock Alliance (EEUU), Alastria (Spain) – are the three best known applications among companies in the insurance sector. B3i is the global insurance and reinsurance initiative through which 38 of the industry’s leading companies aim to create a common framework of standards and processes to exchange information and transactions through Blockchain. MAPFRE RE, along with the 15 founding members and 22 other insurance, reinsurance and brokerage firms, all market leaders, are collaborating in an initiative that will make it possible to transform the insurance industry, guaranteeing greater efficiency and savings, in addition to adapting insurance and reinsurance to the changing world and to new customer needs. The initiative provides the opportunity for market leaders to join forces, take advantage of synergies, share know-how and lead change based on a privileged ecosystem.
Reinsurance is the type of business that Blockchain can be applied to relatively easily due to the fact that the products offered worldwide are fairly standard and follow a number of common processes. Being a business that values mutual trust, common sense, commitment and continuity, it is ideally positioned to apply the innovative model provided by Blockchain.
It is currently the world of reinsurance that predominates in promoting the B3i initiative and is strongly committed to this global project. Currently B3i accounts for over 51% of reinsurance premiums and a further 19% have shown interest in participating in the next round of the project – which means that around 70% of the reinsurance market is either represented or committed. The platform will guarantee potential savings of 1.1 billion dollars in administration costs for the insurance and reinsurance market, and will also contribute with an average increase of 12-16% in efficiency and performance improvements. The anticipated impact will not always be related to cost but also to continuous improvement in the efficiency and modernization of our sector.
The central challenge is to persuade all of the entities that may be interested to get involved, in that the larger and more complete the network, the better the functionality, efficiency and use of Blockchain will be and with better results. Thus, for the B3i platform, it is crucially important to be able to count on the commitment of insurers as the main source of business.
One of the biggest challenges for Blockchain to work properly, apart from its impeccable technological development, is the need for a new legal and regulatory framework to guarantee the security, privacy and rights of all the entities involved internationally in accordance with the international and national legislation of the countries that make up part of the platform. On the one hand it is hoped that Blockchain will help to make considerable savings in operating costs, but on the other, considerable investment will be needed for the resources and time to prepare these new legislative frameworks and to consolidate international agreements on this subject. These anticipated savings can, in broad terms and among other uses, be dedicated to future social projects, but at the same time future reductions in the rates and premiums paid by end user customers will also have to be dealt with in the not too distant future.
About the author:
Ivan Yankov, underwriter and ‘innoagent’ at MAPFRE RE London. Previously an underwriter for the APAC region in MAPFRE RE Madrid, Director of Operations for India Assistance in Mumbai, Coordinator of International Medical Assistance and Repatriations at MAPFRE Asistencia, Collaborator and event organizer for Viajes MAPFRE.