It looks like Legal & General and Amazon will be playing the blockchain game for the British insurer’s future corporate pension annuity deals.
Legal & General plans to run a blockchain-based system called Estua-re for bulk annuities, which Amazon Web Services will design and launch. The new system will speed transfer and storage of financial data.
To paraphrase British comedy legend Benny Hill, blockchain cuts out the middleman. (In the classic skit, he advises this approach, then dies, as he is the middleman.) In the insurer’s case, banks and money managers are bypassed, thus saving costs.
Thomas Olunloyo, Legal & General Reinsurance chief executive officer, said the blockchain technology is perfect to ease the security of data storage it provides.
“Our Blockchain platform ensures there is a single version of the truth that is stored securely and in an unchangeable manner every month for the entire lifetime of the contracts,” he told CIO. “At any point in the future, it will be possible to reverse the clock to any stage in the lifetime of the contract, whether this is five or 50 years, and very clearly understand exactly what happened, what changes were made, the effect these had, and who agreed them.”
He said the program also enables Legal & General to “utilize this data dynamically” as it can develop “a number of apps” within the Amazon-managed blockchain platform.
Not to be confused with group annuities, bulk annuities are a collective of annuities to be managed the same way where the management style is chosen by the individuals in the former.
Banks and other financial institutions have also invested in blockchain systems to save money and simplify transactions, but many have been reluctant to launch products as regulation and reliability are holding them back.
The digital pathway product will be first tested in Legal & General’s smaller markets as opposed to the US and Britain, its primary markets. If the service takes off, the insurer said the bigger regions could see the platform in the future.
Rahul Pathak, a general manager for Amazon Web Services’ blockchain division, said this could be an opportunity for Legal & General to “focus on building new businesses” rather than deal with the challenges of “keeping a blockchain network up and running.”
Amazon is known for being a retail giant but also has become a force in Web-based storage and other services. It launched the blockchain service in April. It essentially makes blockchain management more user-friendly by automating some aspects for blockchains on the Ethereum and Hyperledger networks.
Neither Amazon nor Legal & General representatives could be reached for comment.