When shipping goods from A to B, any number of things can go wrong: cargo gets damaged, a congested port delays docking, a storm throws a vessel off course, pirates raid a ship. So shippers buy insurance through a complex jumble of brokers and underwriters to manage the risk to their freight.
Marine insurance is one of the oldest and least efficient categories of insurance, says Shaun Crawford, who leads consulting firm Ernst & Young’s insurance business. The $30 billion industry presents, in Crawford’s view, just the kind of use case that blockchains, or distributed ledger technology—a hot area for corporate innovation, as this recent Coins2Day cover story details—might disrupt.
In fact, that disruption may arrive sooner than you think. Maersk, the Danish shipping giant, recently completed a 20-week blockchain proof of concept trial for marine insurance this year, the company told Coins2Day. The company partnered with EY, Microsoft, Willis Towers Watson, and several insurance companies to try securely sharing shipping data on a blockchain.
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Maersk used KSI, a blockchain developed by Guardtime, a startup whose technology underpins the tech-savvy nation Estonia, for the test. The platform was designed to make auditing aspects of a shipping supply chain easier, to improve the tamper-resistance and sharing of data in realtime, and to enable many different parties to settle upon the terms of premiums in a more timely fashion.
“Insurance transactions are currently far too tedious and frictional,” said Lars Henneberg, Maersk’s head of risk and insurance, in a statement about the experiment. “Blockchain technology has the potential to facilitate the desired development that is long overdue.”
The partners on the project appeared to be pleased with the results. The technology “has the potential to dramatically reduce time, cost and risk across the entire insurance value chain,” said Bill Pieroni, president and CEO of ACORD, an insurance standards group, in a statement.
Martin Henley, chief information officer of XL Catlin, an insurer, agreed, calling the trial “ground breaking.”
“This is not vaporware or something we’re going to do,” said Mike Gault, CEO of Guardtime, on a call with Coins2Day. “It’s something we’ve built and proven.”
While the partnering companies are using the shipping industry as a start, Gault and EY’s Crawford have plans to expand the platform to other categories of insurance, like automotive, in due time. “Ultimately, we want to use this blockchain capability to track anything that flows within it,” Crawford told Coins2Day.
Maersk is one of many companies putting blockchains to the test. Last month Walmart joined forces with nine other companies, including Unilever, Nestlé, Dole, and IBM, to explore blockchains’ potential to improve food safety.
This is part of Coins2Day’s new initiative, The Ledger, a trusted news source at the intersection of tech and finance. For more on The Ledger,click here.