Block Chain word with icons as vector illustration

Blockchain technology has had plenty of hype, but it could really be a game changer for the global insurance industry, according to report published Wednesday from Fitch Ratings.

In the report, Fitch says it expects blockchain technology to have a major impact on the insurance sector, over the long term. The technology could significantly reduce operating costs, produce more accurate customer data, and enable better risk pricing and improved efficiencies.

“Insurance is fertile ground for blockchain’s capabilities. With the industry’s large number of complex transactions between multiple parties, blockchain could theoretically offer significant cost reductions, improved processing speed, and enhanced underwriting and pricing, while reducing fraud,” the report says.

By reducing the need for reconciliation and audits, automating certain processes, and improving access to data, blockchain technology could help cut firms’ costs and enhance efficiency, the report says, with estimates of the potential savings for the global insurance industry ranging between15% and 30% of current annual expenses.

Notwithstanding this optimism, the sector’s implementation of blockchain technology remains uncertain, the report cautions.

“Part of the challenge is that investment costs relative to benefits are uncertain, and there are numerous legal, regulatory and security issues that need to be addressed to facilitate wide-scale adoption,” the report says. “There is also no particular urgent crisis that blockchain would address to necessitate immediate application.”

The ultimate viability of the technology for the insurance industry “will depend on a select group of industry leaders adopting blockchain to gain competitive advantages,” the report concludes.