A group of technology companies including Microsoft and EY is working with shipping giant AP Moller-Maersk and marine insurers MS Amlin and XL Catlin on a blockchain-based marine insurance platform planned for release in 2018.
There has been much interest in the potential of blockchains to provide secure audits of transactions and to reduce the complexity of transactional processes such as supply chains management, but so far, few concrete large-scale projects have emerged for the technology outside of the banking sector, apart from its original use as the basis of cryptocurrencies like bitcoin.
The new scheme, which is backed by consultancy EY, Microsoft and IT security firm Guardtime, has already undergone a 20-week proof-of-concept evaluation and is set to introduced to a small number of shipping journeys next year as a pilot study prior to a wider planned expansion later in 2018.
The hope is that it will remove a lot of paperwork from the process of insuring shipments, reducing the number of steps required and speeding up billing and collection of payments.
“Everyone is sending bits of paper around and contracts are often not signed until after the ship has arrived at the final port,” said Shaun Crawford, global insurance leader at EY.
Crawford told CNBC that the industry “has a lot of cost to it”.
“It’s facing high administrative burdens of managing and writing claims with a lot of paperwork,” Crawford said. “All contracts are signed multiple times. They go from ship to ship, port to port, through quite a journey.”
Lars Henneberg, head of risk and insurance at AP Moller-Maersk, added that current systems and methods are outdated and could be improved by the application of technology.
“Insurance transactions are currently far too tedious and frictional,” he said. “Blockchain technology has the potential to facilitate the desired development that is long overdue.”
The marine insurance business is worth $30bn annually and is considered to be one of the least efficient segments of the sector. Using blockchain-based technologies, it should be possible to automate many stages of the process via smart contracts – code programmed to execute automatically once certain conditions are met – as well as retaining a corruption-proof record of transactions that should help settle disputes and help insurers to assess risk.
Other insurance companies are also investigating blockchain-based platforms in different areas. A group of European insurance companies including Aegon, Zurich, Allianz and Swiss Re is considering its use in reinsurance. However, the insurance sector is behind banking sector in which a large number of players have already rolled out pilots in areas such as fraud reduction, currency exchange and know-your-customer (KYC) operations.
Maersk is also working with IBM on a separate blockchain project to reduce bureaucracy and costs in the transport of containers.
While it is a promising technology for automation and secure record keeping, blockchain is immature and there are questions over its scalability and energy use alongside its suitability for some of the use cases that are being mooted for it. But the logistics industry certainly looks like a good fit.