AIG, IBM Partner on Novel Blockchain Contract

The 'smart contract' is said to streamline complex insurance policies for multinational clients.
William SprouseJune 15, 2017

IBM and American International Group are partnering to develop a “smart” insurance policy using blockchain digital ledger technology, according to a report from Reuters. The companies say the multinational pilot policy is the first of its kind.

The “smart contract” was developed for Standard Chartered Bank. It uses blockchain to share information in real-time for a main policy written in the United Kingdom, where Standard Chartered is headquartered, with three local policies in the United States, Singapore, and Kenya.

In a statement, Emily Jenner, head of insurable operational risk at Standard Chartered, said the company chose the countries in the pilot in part because of their regulatory complexity, so the blockchain technology could be fully tested.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Typically in multinational insurance, a master policy is issued in a company’s headquarters country, with affiliates requiring coverage locally. Critics say the system is cumbersome, imposing a morass of varying regulations, documentation and payments.

“There’s a lot of back and forth and it’s all through email chains going around the world, instead of a centralized system,” the president of AIG Multinational, Carol Barton, told Reuters.

The companies said the blockchain system allows them to share policy data with their units and insurers in a streamlined manner.

Financial institutions have invested millions of dollars in blockchain technology in the hope that the system, which powers digital currencies like bitcoin, can make transactions faster and safer.

Resource website Blockchain Technologies describes a smart contract as “computer program code that is capable of facilitating, executing, and enforcing the negotiation or performance of an agreement using blockchain technology.”

The code defines the rules and consequences in the same way that a traditional legal document would, stating the obligations, benefits, and penalties that may be due to either party in various different circumstances, the website says.

IBM has partnered with the Danish transport company Maersk along with other companies in other industries to develop blockchain-based products that could make complicated international transactions simpler, faster, and safer.

“Our pilot proves blockchain has a powerful role to play in the future of insurance,” said Rob Schimek, CEO of Commercial, AIG, in a statement. “Any technology, including blockchain, that can increase trust and transparency for an industry whose pillars are built on that should be fully explored.”

4 Powerful Communication Strategies for Your Next Board Meeting