Five of Europe's largest insurers form a group to explore the application of blockchain technology in the reinsurance industry

Five of Europe’s largest insurers have teamed up to explore the potential of blockchain to assess whether the technology can help make the insurance industry more efficient.

The five insurers include: Aegon Life Insurance Company (a Fortune 500 company), Zurich Insurance Group , Allianz (Europe's largest insurance company), Munich Re (one of the world's largest reinsurance companies) and Swiss Re . The group is making preliminary plans to experiment with the application of blockchain in the reinsurance industry.

Blockchain, the technology behind the cryptocurrency bitcoin, is a shared, encrypted database that allows users to securely record details of a transaction or contract in multiple places at once. While the banking industry is currently undergoing a number of blockchain trials, the technology has been slower to take off in the insurance industry.

Alessandro Spadoni, who worked on the project for Zurich Insurance Group, said:

“We have a number of potential use cases for blockchain in mind. The first is the use of the technology in the reinsurance industry. We are investigating the use of smart contracts to streamline the sales and claims processing of reinsurance.

Smart contracts put clauses into code that can be automatically executed when specific triggers are met. For example, a smart insurance contract can automatically pay claims under certain circumstances.

Spadoni added:

“With smart contracts, we should be able to provide a more efficient and streamlined service to our customers.”

According to an analysis report released last week by Capgemini, financial services companies can save a lot of costs by using blockchain technology. For example, in terms of auto policies, insurers can use smart contracts to reduce operating and claims costs by nearly 13%. Part of this can be passed on to consumers, allowing them to benefit.

However, it will take some time for these large European insurers to put this into practice. Spadoni said, "We are not yet fully convinced of the benefits that blockchain can provide. Some careful experiments are needed."

He also added that he has not yet seen any adequate use of blockchain products in the insurance industry.

The group plans to publish its first findings by the middle of next year and hopes other insurers will join them.

Spadoni said:

“If you want to build an industry-wide blockchain network, then you need everyone to participate. You need a network effect.”

Although blockchain use in the insurance industry is still at a relatively early stage, some other trials are already underway. For example, German insurance company Allianz and Nephila Capital have piloted a natural disaster insurance smart contract. IT company Blem has begun to provide blockchain-based contracts for the reinsurance industry. British startup Safeshare is using blockchain technology to provide insurance for people who rent out their spare rooms as offices.