ChainThat CEO: insurtech can slash expenses
Things are moving in the world of blockchain, and ChainThat sees itself among the forefront of those bringing distributed-ledger innovation to the insurance sector.
The company was involved in a blockchain symposium on the island last year, and chief executive officer David Edwards has since made regular visits to Bermuda as ChainThat has refined its insurance sector-focused offerings.
ChainThat was founded in 2015 and provides insurtech solutions. It is backed by Bermudian-registered consulting and managed services company Xceedance, with which it works strategically and operationally.
It is possible London-headquartered ChainThat might also incorporate in Bermuda.
Mr Edwards said: “It's that community thing. We've tried to do things in London, but London is run by committees and it is very hard to make change happen. There are lots of competing thoughts about which way the market should go.”
ChainThat is focused on distributed-ledger technologies and privacy. It has a team of 20 developers and uses the R3 Corda blockchain platform. That platform was created for the finance and banking sector. Mr Edwards said: “What they did at the same time was create the perfect insurance platform for us to run on.”
ChainThat has been involved with R3 for a number of years, and as a result of that relationship it has been able to focus on business applications and not so much the blockchain layer.
Applying the Corda platform to a distributed ledger allows every party involved in a transaction or contract to see the same data and same status at the same time. Those parties could be, for example, brokers, insurers and reinsurers, and a settlement bank.
When asked how much benefit this can provide, Mr Edwards said: “There are lots of estimates about the savings that you can get. You are looking at frictional costs — the cost of reconciliation and co-ordination.
“The market seems to think it is about 30 per cent off the expense ratio — that's potentially quite an impact on the combined ratio. No one has actually proven that today, so our approach has been [to get companies] to come on-board and try it at low cost — run it alongside or in parallel and put a small portion of business through it and see the benefits for themselves.
“Do a paper exercise. How many e-mails are you sending, how much time is each person taking to do it? Build that business case, otherwise you are not going to be able to sell it internally.”
Mr Edwards said the last four or five months have seen a big increase in demand for its services.
“Last year, people started to take note that this could potentially save costs in the industry, and create new business models. In most companies now it is at the board level and everyone is discussing it and no one wants to get left behind.”
He said there is high interest in Bermuda at the moment.
“We are making traction. Once people get their hands on it and feel the benefit, they then become the champions of it internally and can push it through as opposed to us trying to knock on every door trying to convince everyone.”
ChainThat is focused on commercial and specialty insurance and reinsurance at the moment.
Mr Edwards said: “We start with the broker, the primary insurance, and we can do the reinsurance and retrocession. We are going to bring ILS and ILW into the platform as well. So we are trying to cover the entire value chain and all the third parties that need to get involved in this.
“We have been looking at the settlement side. We have been working with a couple of banks as well.”
Mr Edwards acknowledged there is a security aspect with public blockchains, and said that is why ChainThat has gone for an enterprise blockchain.
He said: “R3 Corda has got it right. Imagine that there are five people involved in a contract, and there are 20 people on the network, only those five people have any visibility or knowledge that those transactions are taking place. It's encrypted and you have that immutable aspect of it. It's tamper-proof and it guarantees that what I see, you see.”
Mr Edwards said everyone at ChainThat has an insurance background. He added: “We understand this technology. We are doing this offering at very low cost comparatively. We are not a consultancy, we can get you up and running really quickly.”
One challenge is getting a number of companies to work together.
“It doesn't work only selling it to one insurer, you have to have the trading parties involved and that is always going to be the hard part,” Mr Edwards said.
“We have seen consortiums come along; they have got people together and then tried to get the ideas together and try to do something.
“We understand the insurance industry, so we want to provide the platform and then bring the people on. It's a slightly different approach to what everyone else is doing at the moment, but we think it is a much more effective way, because it gives them a much quicker time to market instead of having to commit lots of resources just to guide where a solution may go.”
• ChainThat has a website at https://www.chainthat.com/