In recent times, there have been virtual Conferences and discussions. One of such is a panel discussion between Sunil Raveendran, a Chief Technical Architect and Mohammed Naquib – the host and Technology Head of IBF Net(L) Ltd.
The discussion was based on Insurance sector and how Blockchain can be used in the sector.
It is worth noting that the first documented Insurance policy can be dated back in 1750 BC by King Hammurabi.
In the Dark and Middle Ages, the guild system emerged – members paying into a larger pool that covered total loss. Later, in the 1600s, voyages to the new world secured multiple investors in each voyage to spread the risk around.
The modern insurance was invented after the great fire of London in 1666. The first insurance in America came in 1732 in Charles town. Tech influenced the sector as early as 1960, when Travelers Insurance Company installed the first IBM mainframe computer invoicing and accounting on computers started in 1980’s.
With the digital boom, and the adoption of AI and IoT, came the need of insuring products and things, in a much efficient way, giving rise to the sector of InsurTech
Evolution of Takaful (Islamic Insurance)
Takaful is a Cooperative Insurance that follows Quranic laws and the teachings of the holy prophet.
The origin of the cooperative insurance has been recorded in line to the practices under al-aqila. Records are found dating to 2nd Century of Islamic era, in the trade system of the Arabs with India and the far East.
Islamic insurance practice differs from conventional insurance practice. It means that Islamic insurance policies must be free from unlawful elements that are prohibited by the Shariah.
An Islamic insurance policy is aimed at providing material assistance against unexpected damage or loss through mutual help and cooperation.
Cooperative insurance like takaful are different from conventional insurance. They are non profit form of insurance based on the motive of community welfare and protection.
It is a ecosystem of technologies that changes the creation, distribution and administration of insurance products by taking advantage of changing consumer expectations and preferences. It maximize technology like Blockchain for enhancement in the insurance sector.
How Blockchain enables insurance business
Blockchain is a shared and immutable record of digital events that can offer an acceptable common version of truth for the participating entities.
Blockchian impact on insurance has been acknowledged by industry leaders including the world economic forums and their reports suggests that by 2027, 10% of the GDP will be from Blockchain itself.
Blockchain brings transparency back to the system of trust and helps to build connected enterprise.
Blockchain for takaful
The rules of the shariah board are recorded in the smart contract to ensure that the rulings are followed at all levels without compromise.
The smart contract replaces the need of a takaful operator by managing the flow of fund, which is tied to the escrow service of the smart contract.
Blockchain benefits for Insurance Industry
Blockchain would eliminate discrepancy, reconciliation, and Friction and enhanced Transparency. It would enhance reinsurance, duplicate claim detection and international captive Insurance.
Also, Blockchain would provide immutability which drives better analytics. Having a trusted data history means a better auditability.
Dependency to banks would be greatly reduced if Blockchain is used in the insurance sector. It would also pave way for tokenization of assets.