Blockchain use-cases in Life and Pensions

Note: These are my personal views and not those of my employers, Tata Consultancy Services

I have written about Blockchain in non-life insurance for 5 years now. Except for one or two articles, I did not write about Blockchain in Life and Pensions. One of the reasons for this is that I did not have adequate background in it. Now that I have gained one, let me correct the situation. I am going to map out the terrain for Blockchain in Life and Pensions.

Firstly there is great opportunity to utilize self sovereign digital identity to improve customer facing processes

1. Customer-on-boarding/service process for life and pensions policies
2. Locating life and pensions policies for living individuals (using SSI) and deceased individual (using nominee feature designed into SSI)
3. Creation and operations of pensions dashboard
4. Life insurance claims management processes using nominee feature of SSI

Please contact me for details

Secondly there is a great opportunity to improve re-insurer facing processes. The key thing to understand is that life and pensions schemes set up long duration contracts between individuals and insurers. Under IFRS17, these get managed in cohorts, such that each cohort is managed uniformly. In addition to the typical insurance-specific Analysis of Change managed under IFRS17, Blockchain can add the capability to vary the risk through re-insurance and retrocessions, specific to the cohort, without the insurer, re-insurer, retrocessionaire(s) separately processing the relevant accounting entries..Of course it is too early for those scrambling to implement IFRS17 to see the obviousness of the business case. The essential business case is to redistribute each element of the risk to the party best suited to bear it, thereby reducing the weighted average cost of capital required to bear the risk for that cohort (the solvency 2 capital for that cohort) across the chain.

Thirdly there is a similar great opportunity to improve re-insurer facing processes for pensions. There are lots of people focusing on processing pensions and pinching pennies. But the real meat of the pensions business is the risk. The ability to transfer, re-transfer and re-re...transfer the risk is useful. Some people are better equipped to manage the risk than others and the people who are able to on-board individuals to pension policies and process policies and pinch pennies in such processing are different from the people who are better equipped to find assets to match the liabilities represented by the cohorts of pensions policies. Instead of the much broken method in which this industry manages its affairs, Blockchain offers a better way with lower costs.

Regards

Pratap Tambe