The Danish shipping conglomerate has partnered with insurers, brokers, consultants and blockchain platform providers to build a real-time insurance application based on distributed ledger technology.
Hardly a week goes by anymore without some news about blockchain in the supply chain.
Blockchain projects and pilots are taking root in all sorts of shipping processes, though it must be emphasized that these are still green shoots, not a fully grown garden.
Another such application came to light last week, when a consortium of different parties, including the global consulting firm EY, the liner shipping group A.P. Moller-Maersk, and the software company Microsoft, announced a new blockchain-based maritime insurance application.
The project, developed by the blockchain solution provider Guardtime on Microsoft’s Azure cloud technology, “connects clients, brokers, insurers and third parties to distributed common ledgers that capture data about identities, risk and exposures, and integrates this information with insurance contracts,” according to the participants. “The platform’s capabilities include the ability to create and maintain asset data from multiple parties; to link data to policy contracts; to receive and act upon information that results in a pricing or a business process change; to connect client assets, transactions and payments; and to capture and validate up-to-date first notification or loss data.”
In an interview with American Shipper, Guardtime Chief Executive Officer Mike Gault said the project had been ongoing since the fourth quarter of 2016.
“We have the technology platform but didn’t have the domain expertise (in shipping),” he said. “Shaun (Crawford, EY’s global insurance leader) and I started talking about the implications of blockchain on insurance. Something clicked, particularly around the efficiency of administration. Insurance is still paper-based. This could drive down the cost base for insurers and brokers.”
That dovetailed with a similar lack of efficiency in the maritime business, Gault said.
The idea behind the maritime insurance blockchain product is not just to eliminate paper-based documentation by moving it to a decentralized electronic ledger, what some might call a first order benefit of blockchain. The bigger idea is to enable more dynamic types of insurance depending on unforeseen occurrences.
For instance, if a merchant vessel is entering a war zone or area beset by piracy, insurers could offer real-time coverage to reflect that new situation.
“They can make a financial decision,” Gault said. “If there’s a storm in their trajectory, is it better to go around the storm or re-evaluate their insurance and make sure they’re covered for any risk. The most mundane aspect of this platform is to ensure claims can be paid out faster. It can take years for claims to be settled. But this platform will ensure that everyone has the right documentation, so the claim can be paid in a matter of hours or days.”
Among the benefits the parties involved in the project have touted are: the ability to link data to policy contracts; pricing or business process changes based on dynamic changes to information; and a platform to connect client assets, transactions, and payments.
Gault said Maersk’s involvement has been invaluable in terms of providing guidance on the specifics of the maritime insurance business.
“Maersk is helping drive the standards,” he said. “They sit on a ton of data. The challenge is very difficult to share that data in a way to make sure the right people have access.”
The insurance project is but one of a number of ways Maersk is dipping its toes in the blockchain pool, from involvement in blockchain bill of lading projects to product traceability pilots.
“It is a priority for us to leverage technology to streamline and automate our interaction with the insurance market,” Lars Henneberg, A.P. Møller-Maersk head of risk and insurance, said in a statement. “Insurance transactions are currently far too tedious and frictional. The distance between risk and capital is simply too far. Blockchain technology has the potential to facilitate the desired development that is long overdue.”
The project also involved the global insurance industry organization ACORD as well as insurance providers MS Amlin and XL Catlin and the insurance broker Willis Towers Watson.
Gault said the project was specifically kept under wraps until it had been proven to work, as the participants didn’t want to add to the sense of unfounded hype around blockchain.
He said it’s critical the industry understands that the technology behind blockchain is less significant than the solutions it enables.
“We didn’t announce this until it was built, as opposed to talking about what we’re going to do,” he said. “It’s easy to put a document on a blockchain. The hard part is the getting the various participants to buy in. We think it’s transformative.”
Maersk, blockchain providers take aim at maritime insurance industry
