This is without a doubt a fantastically positive move by the insurance industry to embrace technology to improve operational performance, optimise the cost of business and improve the security (and auditability) of global marine business being written in the Lloyd's market. That said, it raises the question as to whether blockchain is the missing technological piece of the puzzle that suddenly allows the market to change or - at the risk of coming across slightly cynical - it is simply the catalyst that has created the hype, motivation and commitment to make a much needed change to legacy business practices.
As I hopefully indicated by my opening sentence, the outcome is positive and market wide technology enablement like this is without a doubt welcomed and much needed. However, for a market where you need to be a trusted party to trade, with formal boundaries to entry, governance and controls there are ways in which this proposed problem could possibly have been solved with technology that pre-existed blockchain… you only have to look to investment/trading platforms, eBay, Amazon, crowdfunding sites to see that it is possible to create effective market places for the exchange of assets between trusted parties (including currency) without the use of blockchain technology. This is not to suggest that blockchain isn't an equally or more effective technology for building such a trading platform. My concern is simply that the industry forms a false belief that the use of blockchain will mean building and deploying this solution will be a less complex and intrusive than if it was implemented using an alternative and existing technology.
In summary, this is a great indicator that the messages around the benefits of (and need for) InsurTech and technology enabled transformation of heritage Insurance business practices is landing. However, it is critical that the Insurance industry tempers some of the hype and excitement around the "technical potential" of blockchain and distributed ledger technologies (DLT), to avoid building expectations that this will be a "silver bullet" and straight forward to implement. In my opinion it is achievable but it will not be straight-forward and without challenge.
Although the technology may be fit for purpose and provide a level of acceleration (although for me the jury is still out) the same business transformation challenges exist on things like aligning business practices to common processes and data structures, additional investment in new and existing technology and buy-in to a central transformation programme (and conformity to its mandate).
It is these challenges, and how a business or market effectively overcomes these challenges, that makes or breaks technology enabled transformation programmes. Given the potted history of IT and business transformation programmes across the Insurance industry, I really hope that this programme has the necessary mandate, budget and governance to bring the market on the journey of change required - because if it is well executed I can certainly see the benefits across the Marine insurance value chain.
My personal view is that the real value of such a market model - regardless of whether it is blockchain powered or not - is realised when the platform and a standard way of working becomes the preferred and ideally only way of doing business within that particular segment of the market. As with any such change programme there will be some parties at the front of the line doing cartwheels in support and others that may need to be dragged kicking and screaming into the new ways of working, but my hope is that the market as a whole is ready and committed to support such a programme.
It is both pleasing and reassuring to see Lloyd's putting itself at the heart of transforming the market, opting to be a keen disrupter rather than becoming the disrupted. Alongside programmes like LM-TOM, there are certainly the right indications of a market embracing technology, now it is time for those operating in the market (carriers, brokers, coverholders and service providers) to get behind these changes and make sure that they get through the inevitable hard yards that can be expected to complete this journey… speaking as someone who is part of a business operating in this market, you can count me in.
I look forward to seeing how these exciting initiatives evolve and start bearing fruit!
From next year blockchain technology, which allows records to be securely and instantly updated, will be introduced to the market, allowing real-time updates of shipping contracts, overhauling paper-based systems that have changed little in more than 300 years.