PwC report: Blockchain is $5-10bn cost saving opportunity for reinsurers

posted about 6 years ago
In a recent reportpublished by PwC, Big 4 consulting company predicted that blockchain implementation could save $5-10bn for reinsurance industry.

"Reinsurers are in line to build some of the biggest blockchain applications outside the payments sector, which will enhance risk understanding and open up a $5-10 billion cost saving opportunity through faster, more efficient and more accurate placement, claims settlement and compliance checks such as sanctions", - stated in PwC report.

New research commissioned by PwC highlights the extent to which blockchain could reduce the processing time and cost of placement, claims settlement and key processes such as compliance checks, e.g. sanctions (other compliance checks noted for wholesale insurance include AML/KYC).

The research also showed that blockchain solutions can provide a better view of identity and risk. And given the amount of data flowing between client, broker, reinsurer and outsource service providers, all of which requires multiple data entry and reconciliation, the transformational potential within reinsurance is even greater.

Blockchain technology can be deployed across the reinsurance and retrocessional value chain. A risk can be ceded/retroceded using a blockchain application specifically designed to process treaties, notify all parties and then process premium and commission payments. The technology could also be applied to speed up claims processing and verification.

Reinsurance expense ratios are typically 5%-10% of premiums. PwC analysis of the potential for both more efficient data processing and reductions in claims leakage and fraud indicates that blockchain solutions could remove 15% to 25% of expenses, so delivering an industry-wide saving of $5-10 billion. And faster placement and settlement opens the way for a significant boost in client satisfaction and retention.