Global insurance group AIG is targeting multinationals with a new blockchain-powered cover policy that has been partly developed in Kenya.
The company has partnered with technology firm IBM to develop the insurance cover, which Standard Chartered bank #ticker:SCBK signed onto for its operations in Kenya, Singapore and the United States.
Blockchain, also known as distributed ledger technology, allows for real-time sharing of information across computers in a network. Once data is entered in the digital ledger, it is nearly impossible to alter creating an immutable and transparent record of transactions.
“The blockchain solution creates a new level of trust and transparency in the underwriting process enabling AIG and Standard Chartered to execute multinational coverage more efficiently,” IBM said in a statement on Thursday.
Blockchain is best known as the technology that underlies the cryptocurrency, bitcoin. However, in recent years it has drawn wider attention with companies exploring its applicability in a variety of fields from supply chain management to record keeping.
IBM and AIG built a “smart contract” insurance policy on the blockchain foundation. A smart contract is coded into the blockchain, and self-executes when certain conditions are met.
In the case of the insurance industry, a smart contract built on the blockchain may automatically transfer funds once clients file their insurance claims or it may activate insurance cover once premiums are paid up.
The AIG cover specifically targets multinational companies that have to buy insurance in multiple jurisdictions in addition to a master policy in their home countries.
The idea is to consolidate these complex international contracts into one digital ledger that can be easily accessed by all the involved parties.
“This also allows visibility into coverage and premium payment at the local and master level as well as automated notifications to network participants following payment events,” said IBM.
In selecting the pilot countries, the firms said that they wanted to sample a variety of regulatory regimes. The United States is large and complex; Singapore is a growth market; and Kenya is relatively unique in that it requires payment before insurance cover becomes active.
This product is part of IBM’s push to become a blockchain market leader.