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A lot is being said about the implications of blockchain technology on the shipping supply chain and the prophesised benefits it will eventually bring to the industry, such as cost and time savings. What is worth pondering upon is the potential implication of the shipping blockchain on other, less obvious, areas.
Let’s consider claims handling. In essence, at least conceptually, claims handling consists of various steps which every handler goes through whenever they are notified of a new claim. This process could be described as information gathering, analysis, planning and execution of strategy and settlement. This procedure could be repeated numerous times during the course of one claim, depending on the complexity of the case and availability of information. Hence, the efficiency and quality of the claims handling process will largely depend on the first step, information gathering.
At times claims are notified but due to the lack of information, the most appropriate strategy cannot be developed, or it has to be changed once additional pieces of information are revealed. This situation can lead to a bottleneck as a lot of the claims handler’s time is being used on collecting and verifying the necessary information from various sources including members, surveyors, brokers or local authorities, cargo experts etc. This information then has to be disseminated to other relevant stakeholders such as external legal teams - often in more than one jurisdiction - brokers, and correspondents or back to cargo experts. Essentially a lot of time is spent on sharing information and making sure every party is up to speed with developments. This process can be slow, inefficient, complex and often very expensive. Claims take longer to be settled and insurers have to keep their reserves locked on files for much longer.
Can blockchain help? In short - yes! A wider shipping blockchain could provide a distributed ledger of information, which could be accessible to all the relevant parties involved in the shipping process at the same time, including claim handlers. Assureds could simply register a claim on the blockchain, which would then automatically collate the necessary information directly from the relevant sources. The obvious, uncontested, information about the container, cargo carried, ship involved parties, copies of the contracts etc., could be automatically provided to everyone at the same time. Crucially, the insurance claims handlers could immediately start forming the best resolution strategy without absorbing the time of the assureds and other parties by asking for additional information to be sent via email. Claim executives would have all the necessary data to engage additional resources like suitable experts, or external legal teams.
Blockchain could substantially improve the loss notification process by streamlining it. Smaller, attritional and more straightforward claims could be dealt with much quicker. All parties could easily inspect the status of claims. Blockchain would also help claims handlers to improve compliance and enable faster payments to service providers. Claims for which additional investigation is required could be identified much faster. This approach would also improve the quality and quantity of claims data management. This could be vital for identifying claim patterns to be addressed by loss prevention teams. The significance of this technology on claims has been recognised by some of the largest business consultancies like Ernst Young.
Ultimately, “plugging in” insurance claims teams into the shipping supply blockchain will be hugely beneficial. Claim handlers should be keen to acquire understanding of the use of blockchain technology in shipping and its predicted benefits as it is predicted to change how the claims are handled in the near future.