Life insurance and financial services giant John Hancock has begun work on multiple blockchain proofs-of-concept designed to show how distributed ledger technology could reinvent established insurance industry processes.
But, as yet, the proofs-of-concept aren't actually related to insurance. Instead, the company that last year doled out $24.6bn in customer claims is exploring blockchain in a wide-range of areas of the business, with actual insurance applications only to come in the future.
John Hancock's head of innovation, Ace Moghimi, said his team was working on several blockchain applications aimed specifically at making the company more transparent and more efficient.
Moghimi told CoinDesk:
"Usually we'll start with a customer need or a business problem we're trying to solve. But for blockchain, we were looking at the impact of what this tech could have on our operational efficiency and effectiveness."
Specifically, Moghimi said John Hancock, the US name for Canada-based Manulife, is working on a know-your-customer (KYC) trial, something in its legal department and a project to streamline back-office operations.
However, the proof-of-concept Mohmini was most excited about was in the area of employee rewards, or creating an incentive program around blockchain.
"When you think about the aspect about how mining occurs and transactions go though the network, there's some interesting dynamics there that you can gamify," Moghimi said.
Each proof-of-concept is being built out of the company's Lab of Forward Thinking (LOFT) in Boston, Massachusetts. Established in May 2015 and launched in July, LOFT was created to enable employees to develop new technologies related to insurance as well as wealth and asset management.
Internal brainstorming sessions at LOFT, Moghimi said, resulted in several possible use cases, which led the team to meet with representatives of ConsenSys Enterprise and BlockApps, two startups working on the Ethereum blockchain.
ConsenSys Enterprise lead technical developer, Igor Lilic, said that when his company first met with Moghimi and the rest of the LOFT team in person, they were already well-advanced in their blockchain research.
Lilic described how Consensys Enterprise is working with LOFT to build the prototypes:
"They are a team that has a mandate toward innovation so they have spent time understanding the blockchain technology, mapping out various use cases that made sense to them. And then as a team, we worked together closely to move through those use cases."
Blockchain and insurance
John Hancock offers and administers a wide range of financial products, including life insurance, annuities, investments, 401(k) plans, long-term care insurance, college savings and other forms of business insurance.
While the company isn't sharing details around its proofs-of-concept, earlier this year 'Big Four' accounting firm Ernst & Young published a report listing peer-to-peer insurance and faster distribution of "regionalized or personalized" products among its list of opportunities for insurers using blockchain.
Other possible applications according to the report include fraud detection through creating a decentralized repository of customer information and policies; digital claims management through providing historical third-party transaction data; types of distribution using micro-insurance and micro-finance; and new kinds of products around "cyber liability" for security professionals.
But, not all considerations mentioned in the report were positive.
Among the concerns EY notes is a potential for blockchain to increase the liability to both insurers and brokers, and that such adoption "creates the need" for new regulation.
From the report:
"As society becomes increasingly digital and distribution channels more varied and complex, customers have higher expectations in choice of product or insurer. When certain aspects of the value chain become more commoditized, as a result, a customer bases a choice entirely on the availability of brand information and transparency of the insurer's performance. The integrity, controls and transparency of insurers' business processes, reinforced by recent trends in regulation, must be geared toward protecting the customer experience. Unless insurers are prepared to innovate, either customers or regulators will force them to change."
Last year Ernst & Young placed insurance companies among the least trusted types of companies, with just 56% of people saying they trusted them. For some comparison, supermarkets were the most-trusted companies with 85% of people reporting a strong belief in these brands.
For the time being, the blockchain group at John Hancock's LOFT consists of four people currently working on a minimum viable product for the employee rewards application of blockchain technology.
Moghimi said he was unable to share the details of the application, but did elaborate on what its next steps are.
When the MVP is released in about a month's time, it will conclude the education and platform-building phase of the team's work with ConsenSys Enterprise and BlockApps. The next phase of the work will focus around tapping into ConsenSys Enterprise consultancy services and identifying broader use-cases of the work.
All of this, though, is just the beginning of a much larger project to build blockchain into John Hancock's actual insurance services -- a process still in its early days for the massive industry.
In the US alone, the insurance industry including life, health, property and casualty insurance generated a total of $1.04tn, according to the most recent US Treasury report, a 4% increase from the year before.
Before an industry with that much momentum can bring about a significant change of course, Moghimi says industry leaders will have to get involved.
"It all really depends on how regulations go to. We're still talking about a tech that's very risky from that perspective. Once that gets figured out, you'll see the technology becoming more ubiquitous."
John Hancock Center image via Flickr