Blockchain has attempted to disrupt Banking for the last few years, with very limited success, if any. However, recently there was a commercial launch of a Blockchain based Insurance solution within the Maritime space. This could be an indication that Blockchain has actually found a problem to solve within Financial Services.
A few weeks ago @bernardlunn discussed why Insurance is where Blockchain will see better traction than Banking. So why Marine Insurance?
- It is a $30 Billion market growing at 2-3% p.a, thanks to more sophisticated ships
- They have notoriously bad processes that are currently used by Insurance firms to underwrite insurance policies.
- There are too many players in the shipping value chain who slow down the process of exposure management for insurers.
- The quantum of data that the industry generates makes it an excellent playground for an AI engine driving financial decisions.
There are three key names involved in the commercial launch. EY, partnering with blockchain specialist Guardtime (who just raised $16.5 Million), using R3’s Corda have managed first Blockchain enabled Insurance platform for Marine shipping.
The platform is called Insurwave. Using blockchain throughout the Marine shipping value chain will cut down friction and save Millions of dollars. Shippers can track assets in near real time, and in turn allow insurers to manage their exposures within similar SLAs. This allows premiums to be decided instantaneously – this used to be a particular pain point for Marine Insurance due to lack of data.
Maersk, another big name in the industry is placing its Marine Hull portfolio on to the platform.
Cargo insurance is another space where tracking of shipments on Blockchain would bring transparency to the process, and help insurers decide the right premium. Typically, users of insurance (shipping firms), would not declare some shipments if it would affect their premiums.
The first launch of Insurwave covers 1000 commercial ships within the first year, so the technology is yet to prove its scalability with this use case.
Shipping industry is notoriously data heavy, so we will need to wait and see on this. While a lot of data could be an issue for Blockchain, AI loves it. The technology can study patterns much faster than a human driven process, and make suggestions helping real-time insurance decisions.
Historically, underwriting and risk managing insurance for the marine industry has been based on pretty static variables like past claims, weight of the vessel and the domicile. There was no real time intelligence.
An Insurtech firm Concirrus, in partnership with EY have developed an AI based Insurance engine that does “Behaviour based underwriting” for the Marine industry.
To augment the existing underwriting and risk models, Concirrus capture real time data such as Ships real-time location, speed , vessel statistics, cargo and machinery. This is then combined with past claims to come up with a better informed Insurance premium. Concirrus have identified patterns of assets insured within the industry using historic data, to predict their future behaviour.
Another insurtech firm in this space, Windward, use operating patterns to predict accidents. They are backed by investors of another Insurtech giant, Lemonade. Their technology is particularly used in Defense and government agencies to spot threats to national security. Most recently, the UN Security Council used their technology to enforce sanctions on South Korea.
The Marine industry seem to be ramping up its technology infrastructure, thanks to data intensive operations, that are currently inefficient. An excellent opportunity for Blockchain and AI, one only hopes that the solutions in production will scale. Watch this space.
Arunkumar Krishnakumar is a Fintech thought leader and an investor.
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