When a family loses a loved one, it faces a litany of immediate tasks such as planning the funeral and placing an obituary in the local newspaper. All of this must be done while the bereaved is processing the emotional components of the individual’s passing. Amidst all of the raw feelings and deluge of family, it is natural for more mundane tasks such as filing a life insurance claim to fall by the wayside. Sometimes the family may not even know that the deceased has a life insurance policy.
This opaqueness does not serve the claimants or insurers well, and leading global insurer MetLife is utilizing the live public Ethereum blockchain to add transparency and efficiency to the claims process. In what is believed to be the first pilot program in the world focused on the life insurance industry, MetLife’s Singapore-based incubator LumenLab is collaborating with Singapore Press Holdings (SPH) and NTUC Income (Income) on a platform of smart contracts known as ‘Lifechain’ to help loved ones quickly determine if the deceased was protected with a policy and automatically file a claim.
If successful, this program has the potential to transform the insurance industry as a whole, creating new markets, products, and the ability to serve a more diverse set of customers at lower price points.
How it Works
Once an obituary is placed with SPH’s portfolio company, The Straits Times, the family will be informed of this new program. If they choose to participate, Lifechain will encrypt the deceased’s National Registration Identity Card number (which is included in the Death Certificate) using a hashing algorithm and place it onto the blockchain. This will trigger a search on NTUC’s end for a matching life insurance policy. If a match is found, “SPH will inform family members within one working day, while ‘Lifechain’ will send an automatic notification to Income via email to initiate the claims process.”
The Value of Blockchain
According to Zia Zaman, CIO of MetLife Asia and CEO of LumenLab, it was important to utilize blockchain technology for three key reasons. First, he said “We think there are benefits from a security point of view”. Second, he noted that there is a lot that they can learn from DLT from experimenting with it, as opposed to a traditional database. Specifically, he noted that “If you try technology that has been around for twenty years you’re not going to learn as much as if you try it with a decentralized system like DLT, and that’s advantageous because we are realizing that there is a lower cost of implementation for this system versus the other way.” The third reason, and perhaps the most important, is that DLT systems are built for multiparty participation. “As a data provider, if you use DLT, it is much easier to add another node.”
This final point could be critical, as for the platform to scale it will be necessary to incorporate other key stakeholders, in particular the government. Zia noted that “The future of distributed ledger technology in life insurance will somewhat depend on public sector involvement. Those jurisdictions and governments that are more innovative will see citizens and policyholders in their jurisdictions benefit from less friction, more fulfilled payments, and a general overall improved experience.”
Additionally, he told me that there are “a whole variety of private-sector companies that are adjacent to life insurance, but who are somehow either related to health or in some other ways dealing with low risk security to the customer base, who could potentially use DLT and contracts like this to provide peace of mind to its customers in case something were to happen in a very rare event.”
The Road Ahead
It is important to note that this is not MetLife’s first experimentation with blockchain technology, nor is it the first time it is using a public ledger. In fact, the core smart contract platform that constitutes Lifechain is very closely related to what was built for the company’s first successful pilot, a mobile app called Vitana, that utilized Ethereum to pay out claims to expectant mothers who contracted gestational diabetes.
This bodes well for the core functionality of the platform, but there is still much that will need to be decided for this use case to scale. For instance, MetLife is able to utilize the public Ethereum chain because its sample size of approximately one thousand users is not large enough to meaningfully impact transaction volume on the blockchain, which averages about 13 per second.
However, to meaningfully service the entire industry, not just in Singapore but around the world, the platform will need significantly higher throughput. Zia has already thought about this challenge, and without extrapolating too much noted that in the future the company may need to look at other public or even permissioned blockchains.
Finally, in light of Facebook’s announcement yesterday of its new stablecoin, Libra, I asked Zia about the potential of using a form of cryptocurrency in the future as part of the redemption process for life insurance policies. In response to this question he noted “We have no plans on doing that, nor have we thought about it for our existing use cases. That doesn’t preclude it from the future of course, but for now we have not thought about it.”
Therefore, there is still much to figure out, but at the same time this project is getting off to an auspicious start.
Date: June 20, 2019