Welcome to the first Insureblocks episode!
In this “genesis” episode (a punt to the blockchain community, regarding the first block of a chain often referred to as the genesis block) we have a chat with Gary Nuttall, managing director of Distlytics., who explains to us the basics of blockchain. Have a listen to our podcast above or read some of the show notes below.
2 minute definition of blockchain
A good starting point is to try and define what is blockchain? Gary takes a very pragmatic approach which recognises that there isn’t a formally agreed definition on what is blockchain as there are many different types of blockchains. He tends to describe blockchain in two ways:
- A protocol – essentially an agreed way of doing business or transactions. So blockchain is a protocol as much as TCP/IP is a technology protocol for the World Wide Web
- The second and probably easier one to digest, is that blockchain is a write only database which is decentralised, distributed, time-stamped and cryptographically secured
I hear you! What do you mean by “cryptographically secured”? All it is, is the application of computer generated algorithms (mathematical formulas) that transform the data in a manner that it can be securely shared between people.
I loved Gary’s quote regarding smart contracts as being “the most misnamed thing I’ve ever heard”.
“smart contracts… the most misnamed thing I’ve ever heard”
The fascinating thing about smart contracts is that they’re neither smart nor a contract. All they are is effectively a computer program that enables a blockchain to interact with external activities or triggers. So for example with a flight delay insurance policy a smart contract can be used on a blockchain to determine whether or not your flight is delayed. If it is delayed then an automatic payment is made to your bank account without the insured having to make a claim.
Here is an example of such a flight delay policy by Axa insurance with Fizzy:
Blockchain in the insurance space
Having analysed the entire insurance value chain for commercial insurance, Gary has identified around 88 potential use cases for blockchain. Ultimately his view is that anywhere you’ve got data that is shared between multiple parties, with a need to prove the accuracy and completeness of it all in an efficient manner, is an opportunity for blockchain. Of course for the insurance world this means reducing the inefficiencies in the bordereau process, claims process, and even managing your KYC checking for on-boarding an organisation to name a few. By reducing those inefficiencies and costs you open up the opportunity for truly innovating product developments with other emerging technologies from Internet of Things (IoT) to artificial intelligence (AI). When combining these new technologies with blockchain you open yourself to some very exciting opportunities.
One of the qualities of blockchain is that it helps to remove intermediaries. As we all know there are numerous intermediaries in the insurance ecosystem and everyone wants to make sure that they’re not the one who will be disintermediated. As Gary found out that depending on who you speak to, brokers will say there will be no need for underwriters in the future, underwriters say there will be no need for brokers in the future and when you get them both in the room they’ll say that it’s the likes of the bureau that won’t be needed in the future. So everyone’s just trying to protect their own turf in some way. What we can all agree is that it is unclear what will happen in the future but it will definitely be very different in a few years.
Gary shares many other fascinating points in this podcast, so please have a listen and tell us what you think? If you liked the podcast please do review it on iTunes or Google Play. If you have any comments, suggestions on how we could make it better please don’t hesitate to a add a comment below. If you’d like to ask a question to Gary, feel free to add a comment below and will get him over to our site to answer your questions.
Thanks again Gary!