One of Japan’s global IT service provider, NTT DATA, with yearly revenue of around $16 billion, has successfully completed a test prototype of blockchain based smart insurance.
Their focus was on international trade, especially shipping, where there is a lag between goods delivery and payment, creating risks, according to Tetsunosuke Shinya, the manager at Tokio Marine & Nichido Fire Insurance.
To minimize such risks, a universal business practice of letters of credit issued by banks has become the norm, which serves as a guarantee of payment.
That procedure is complicated and time consuming. But with blockchain technology, smart insurance can reduce “the shipper’s data-input workload by about 85% and the insurer’s workload by about 83%,” according to a press release.
They say they have successfully tested a prototype, “proving that blockchain offers attractive security and cost advantages for shippers and insurance companies.”
NTT DATA says blockchain technology can enable “transactional parties, including shippers (exporters), consignees (importers), banks, insurance companies, and carriers/forwarders, to share information simultaneously.”
After a first prototype which tested the practicality of using blockchain technology for shipping insurance, a second prototype was developed during December 2016 to March 2017.
That test prototype “proved that blockchain offers attractive security and cost advantages for shippers and insurance companies,” NTT DATA says, considerably reducing workload while ensuring that only legitimate transactions are processed through the decentralized nodes system.
“Going forward, we plan to invite many companies to join our initiative and eventually commercialize a system for a blockchain-based international trading system. The goal is to launch the system in Asia and then expand into other regions including Europe and the United States,” said Yoshiharu Akahane, General Manager of NTT DATA’s Financial Business unit.
Shipping is an ancient, but very relevant, industry, as 90% of the world’s trade is still carried through shipping containers. It is a vast field, with its own specialized law and business processes.
Much of it is complicated, with considerable risk if things go wrong, thus complex processes have developed to hedge risks and allow for a smooth operation of international trade.
Such processes are usually paper based, with its many problems. Blockchain technology promises to streamline and simplify much of it for instead of a paper that has to go around everywhere, an unforgeable digital record can be accessed and modified as required.
Blockchain technology, therefore, has attracted much interest from the shipping industry, one of the first to adopt it, and perhaps in many ways the most advanced in testing and prototypes.
The world’s largest freight company began testing blockchain technology last year. Since then, supply chains have become one of the hot topics, with the field seemingly continuing to move ahead on blockchain adoption.