The digital economy of today demands businesses to seize opportunities to establish rules and standards for entirely new industries.
Over the course of my posts about the Technology Vision for Insurance 2017, I examined how artificial intelligence, digital ecosystems and other trends are changing life insurance. To wrap up, I shall look at a trend we called The Uncharted, which is all about setting new standards and regulations for the new digital world.
Defining new rules
From technology standards, to ethical norms, to government mandates, to the social contract—many rules remain to be defined for the ecosystem economy. Based on our survey, insurance executives know this well:
Insurers, including life companies, will need to partner with regulators, standards bodies, consumer protection organizations, open source communities and other ecosystem stakeholders to define the rules and risk management practices of a new digital industry,
As the lines between industries blur, the rules for an ecosystem must be written to both consider and apply to every partner—no small feat given the varied capabilities and demands of stakeholders in emerging industries. The ripples created from new digital industries can turn into disruption at all levels of society.
Digital trust (security, privacy, and digital ethics) should therefore be core to any digital industry strategy. Life insurers won’t just be implementing governance strategies through offline activities carried out by the likes of boards and committees; they’ll be digitally replicating these approaches by embedding rules and standards within technologies themselves.
Blockchain solves age-old problems
The most mature of the emerging technologies for embedding rules into technology and business processes is the distributed database known as blockchain. Blockchains deliver built-in solutions to many historical challenges of governance, including:
- Transparency
- Immutability
- Ability to operate in a distributed fashion
Often related to blockchain, smart contracts offer an automated way to enforce a contract whether the counter-party is trusted or not. Smart contracts design-in the rules for an exchange of value and can be self-exercising or self-enforcing as a situation demands.
The broader insurance industry is starting to examine what blockchain could mean for the industry and connected sectors.
The BI3 consortium formed by Aegon, Allianz, Munich Re, Swiss Re and Zurich is exploring whether blockchain technology can be used to develop standards and processes for industry-wide usage and to catalyze efficiency gains in the insurance industry. The project has since added new members, including Liberty Mutual, Sompo Japan Nipponkoa, the Reinsurance Group of America, Hannover, Generali Group and SCOR.
Q: How important will blockchain and smart contracts be over the next five years to your organization? (Please click on your choice)
New technological solutions that address the historically cumbersome challenges of governance, accountability, and digital trust will continue to emerge. With the relentless pace of change across industries, carriers should decide how to use them to help shape the new rules of engagement for the emerging digital ecosystem.
Trend 5 predictions
- Within three years, businesses with mature digital strategies will operate across currently siloed industries. For these companies, industry boundaries will vanish, and each new endeavor will amplify disruption.
- By 2020, there will be entire ecosystems requiring the use of smart contracts to participate.
- Within five years, new performance-based contracts—taking the form of ‘if/then/else’ between two or more parties—will exclusively be smart contracts that self-govern and self-execute.
- In five years’ time, there will be numerous instances globally where governments will cede rule-making authority to industry groups or, minimally, enact regulations that were designed by an industry consortium.
For further information, have a look at our Technology Vision for Insurance 2017 page.