Why blockchain needs to deliver better, not just different, insurance products
- 25 May
Blockchain is becoming a force for good in many areas of society – bringing banking to the unbanked in the developing world and minimising election fraud are just two examples, but there is still a lot of head scratching going on when it comes to insurance. A recent PwC survey of insurers said that 56% recognised the importance of blockchain, but 57% said they didn’t know how to respond.
Yet respond they must. Whether the corporate view is to be a blockchain believer or blockchain doubter, it is important to develop a distinctive view of the future to shape strategies and stay ahead of competitors. That means keeping on top of evolving customer needs.
In a commoditised market, where a 5% difference can be the difference between winning and losing, a continuous focus on strategic new product development is essential.
Blockchain delivers benefits for insurance
There are many factors which make blockchain an attractive proposition for insurance: multiple parties requiring common views of data; the need to update information on a regular basis; the requirement for the information to be verified; the interactions being time-sensitive; and the interdependency of the transactions. For the insurer, this has the potential to reduce costs, errors and time within the chain considerably. According to insurance industry initiative, B3i, blockchain and smart contracts could improve sector efficiency by up to 30 per cent.
There is a danger, however, that when it comes to developing products on blockchain, the enthusiasm for the technology will run ahead of the focus on the customer. For all the many helpful words written about blockchain in the last 12 months, all too often the reader is left wondering what it really means for the man or woman on the street.
Bringing the benefits of blockchain to life for insurance customers
Typically, service-based value propositions centre on one or more of speed, ease of use, cost, flexibility, accessibility, reliability or security. Some of the first movers in the blockchain space, like iXledger, are utilising blockchain for trading insurance products at the B2B level. Others are attempting to add new value components for the consumer. InsurePal, for example, is introducing community and reward with its concept of social proof to reduce premiums. The marketing challenge in each case will be to help the customer understand the benefits and trust that it works in a way that is superior to that which already exists.
The golden rule with new product development is that products must always be pathways to customer benefits. Or, to put it another way, the most important future technologies are those with the potential to better meet customers’ basic needs.
Ensuring blockchain is practical and useful
David Packard, co-founder of Hewlett Packard, said in the 1990s: "To warrant serious pursuit, an idea must be both practical and useful. Out of those ideas that are practical, a smaller number are useful. To be useful, an invention must not only fulfil a need, it must be an economical and efficient solution to that need"
If insurance brands – large and small – can’t keep this thought at the front of their minds when looking at the potential of blockchain, they will fall into one of the biggest traps in new product development – building it because they can, not because they should.
This article was published on Post Online.