Insurance colossus AIG has entered into a collaboration agreement with IBM to develop a 'smart' insurance policy that will use blockchain technology to manage complex international coverage. The companies issued a joint-press release in which they disclosed that they had successfully completed a pilot of what they have termed a 'smart contract' which is a multi-national policy for Standard Chartered Bank PLC.
AIG confirmed that the 'smart contract' it's the first of kind using blockchain's digital ledger technology. The Standard Chartered Policy utilizes blockchain technology in order to facilitate the sharing of real-time information for a main policy written in the UK, where the bank is headquartered - and three additional policies in Singapore, Kenya and the US.
A number of financial institutions, investors and large banks have invested millions in blockchain technology in the hope that it can revolutionize the financial services sector by enabling them to process transaction faster, easier and securely.
IBM has been very proactive in relation to blockchain technology and has previously engaged in other projects across different industries, such as its partnership with Danish transport company Maersk. They entered into an agreement to create blockchain-based products that can streamline complex international dealings across sectors.
Blockchain technology powers the digital currency bitcoin which enables it to share data across a network of individual computers, and it has attracted popularity on a global scale due to its capabilities in recording and keeping track of assets and transactions across several different industries. Multinational insurance coverage is often labelled as cumbersome due to the maze of international regulations, paperwork and payment terms.
President of AIG Multinational, Carol Barton claims there's a need for a centralized system. She said, "There's a lot of back and forth and it's all through email chains going around the world, instead of a centralized system."
Traditionally, a master policy is implemented in the country where an organization is headquartered, while affiliates often require coverage in other countries that impose different rules in relation to documentation and payment terms. The real-time system allows companies, their units, and insurers, among others, to simultaneously share all data and documents about the policies, the companies said. It also notifies all of those involved about payments.
The territories selected for Standard Chartered's coverage each introduced a level of complexity for testing the technology, IBM said. For example, a Kenya regulation, known as "cash before cover," requires policyholders to pay for their coverage before it is valid.