PwC report: Blockchain can save $5 to $10 billion in operating costs for the reinsurance industry (download the full report)

The multinational professional services firm PricewaterhouseCoopers (PwC) recently published a report (download the full text of the Coin Library) showing that blockchain technology can save the global reinsurance industry $ 50到100亿美元in operating costs.

PwC: Using blockchain to reduce costs

PwC’s findings suggest that blockchain solutions can reduce reinsurance processing time and lower operational costs for reinsurance placement, claims, settlement and other key processes such as compliance reviews.

The cost of obtaining, structuring and servicing reinsurance comes from the “reinsurance expense ratio”, which PwC says is “typically 5% to 10% of premiums” for reinsurers.

The report states:

Our analysis shows that blockchain solutions can provide more efficient processes and lower operating costs, which could reduce expenses by approximately 15% to 25% across the industry, or approximately $5 billion to $10 billion.

In addition, a large amount of data will be generated among clients, brokers, reinsurers and outsourcers, requiring multiple data entry and reconciliation.

PwC said that blockchain solutions can provide reinsurance companies with better identity authentication and risk control.

Reinsurers turn to blockchain

In May this year, the Financial Times reported that most reinsurers have turned to blockchain technology. The most important factor is IT system supplier Blem, which has developed a claims recording system for reinsurers using blockchain technology.

Michael Mainelli, co-founder of the Z/Yen business think tank, said the system uses "timestamping and auditing to record data."

Mainelli explains the disruptive potential of blockchain solutions.

Insurance companies are always skeptical of the reinsurers of each policy, fearing that they may change the data at will.

With the immutable nature of distributed ledgers, insurers no longer have to worry about similar issues, he said.

Gavin Blem, CEO of Blem, said:

Timestamps provide a level of certainty that previously recorded reinsurer information will not be modified.

Most financial blockchain projects are aimed at the payment sector. However, reinsurers are about to create blockchain use cases outside of this sector. PwC mentioned that blockchain can not only save costs for reinsurers, but also greatly improve customer satisfaction and retain more customers.

To learn more about the development of blockchain and the insurance industry, please click "Blockchain and Insurance Industry Special Topic: Self-Management Model of Risk Products".