The technology behind the currently extremely popular cryptocurrencies, blockchain, is expected to have a greater overall impact than the digital currencies running on the technology, according to finextra. Blockchain, also known as distributed ledger technology (DLT), enables the transfer of assets and information between parties without a central authority. DLT offers opportunities for many industries, the direct market for life and annuity products, for example, in which insurance carriers sell fixed and variable annuities and products through registered broker dealers. Many times, insurance carriers have selling agreements with broker dealers, who, if they are not self-clearing entities, utilize clearing firms. The premiums and commissions related to these products are often executed on a gross basis according to the agreements between the parties involved. There are currently still broker-dealers who process up to 50% of their direct business annually with paper statements and checks. It goes without saying that this process has a lot of room for improvement in efficiency, errors and risk. Different from public blockchains such as for bitcoin, DLT can also be used privately where only the parties with permission can access the blockchain. This way, a central authority remains out of the picture, yet the transaction data stays private. This is how DLT can be used to digitize the insurance value-chain, making it more efficient and cheaper. The involved parties would have access to a private permissioned ledger, where privacy concerns would rule out the sharing of personal and transaction client information, except with the nodes (linked to the involved parties) that are part of the transaction in question. The data maintained in the chain is then used to validate the client and transaction information. Next, the completed transaction is added to the ledger after the broker dealer confirms the transaction information to the client, who accepts it. Naturally, this is a limited description of the complete process, however it covers the main gist. Of course, scalability and integration of DLT with legacy systems will take time and evoke challenges, however DLT provides the industry with a whole new approach to do business. Ultimately, the success of DLT will be determined by the ability to overcome challenges and identify appropriate business cases.   By Michael Brooijmans, Research Analyst at Holland FinTech]]>