Celent – a finance information technology consultancy firm – has highlighted how the insurance and reinsurance sector could benefit from cross-sector collaboration by leveraging the finance sectors’ experience of cooperative development and applying R3 earnings to the re/insurance sector.
R3 is a membership organization which facilitates exploration of distributed ledger technology (DLT, or blockchain) using a structured development approach; it develops solutions for banking and securities firms, with a focus on the areas of identity management and reference data management, and according to Celent analysts the consortium’s findings have direct applicability to re/insurance use cases.
The consultancy firm makes the case for re/insurance responding to emerging technologies through uptake of collaborative development use, pointing to how blockchain has proven to be especially well-suited for use in a cooperative approach.
Celent analysts said; “Cooperative development in a consortium model reduces risk and strengthens design through diversity of opinion.
“For DLT, consortia facilitate network effects, mutualization of costs, consensus, and platform choice.”
Just as the re/insurance sector has been increasingly partnering with start-ups to catapult innovation, the finance sector has been in a cycle, with a parallel trend of partnering with fintech and/or insurtech startups to codevelop solutions and share intellectual property.
The finance sector’s experimentation with these new technologies has sped up adoption and automation of new development patterns, such as agile technique use, and firms have been growing their capacity to experiment through continual investment in innovation labs.
One fast-growing trend of technological innovation in the finance sector has been increased prototyping with traditional system integrators, Celent said.
Senior Analyst in Celent’s Insurance practice, Mike Fitzgerald, commented; “If insurers choose not to pursue cooperative development, they will need to determine how to obtain the insights and efficiencies of such models on their own. Otherwise, they will fall behind their competitors.”
He added; “The full results from consortium experiment to implementation are, as of now, still emerging; installing new industry business models which employ emerging technology is nontrivial. It remains to be seen if, going forward, global learnings can be successfully generalized on completed projects. However, the journey is underway, and insurers are encouraged to participate”
The re/insurance industry has recently seen a string of insurers and reinsurers join the Blockchain Insurance Industry Initiative (B3i), after successful testing of the concept has proven its potential value.
With 15 of the largest players across the globe lining up to join the information exchange, the re/insurers blockchain initiative has taken off at a fast pace since its launch in October last year, but as highlighted by the Celent report, with experience that would set re/insurers a few steps further ahead of the technology race, the finance sector could offer a competitive advantage with additional insight.
Many finance sector processes have already been considerably transformed by the fintech revolution, so investigating methods of further cross-industry collaboration has potential to vamp up the impetus for insurtech solutions.
And with blockchain being cited as a $10 billion opportunity for the re/insurance industry, able to make processes more efficient and ultimately save the sector money, re/insurers would do well to not pass up a chance to investigate further knowledge sharing opportunities for what’s been cited as one of the biggest re/insurance catalysts on the horizon.