Auto-executing smart contracts may be the most exciting blockchain application for the insurance industry, bringing the potential to move from simple binary triggers such as flight delay insurance to more complex IoT sensor triggered contracts, according to Morgan Stanley.

Although the insurance industry is relatively late in looking at blockchain’s potential, work on incorporating the disruptive technology at an individual company level and also through industry consortia is accelerating, Morgan Stanley noted following its inaugural Insurance Digital Disruption Day.

Industry experts at the Morgan Stanley event shared recent AI breakthroughs; Aviva’s Mark Wilson explained his firm’s “Ask it Never” underwriting concept – where quotes can be provided without the need to ask customers questions.

Aldo Monteforte from The Floow said that pure driver behavourial data from telematics is now the technical ‘equal’ of traditional motor insurance rating factors.

Andrew Rear from Munich Re Digital Partners said commercial lines underwriting stands to be completely transformed by AI.

As the Internet of things continues to revolutionise global business, it opens up a realm of both new risks and challenges for re/insurers and new opportunities.

Morgan Stanley analysts commented that cheap, connected sensors have the potential to radically change the industry – driving significant risk prevention and the ability to mitigate risks in real-time; “this creates challenges in terms of managing the additional volume of data and implies that over the long run that insurance revenues will lower – however, it also raises the prospect of additional sources of revenue – for example from operating the sensors and analysing the data.

“Adjacent businesses are increasingly cognizant of the value of data that can be used to price insurance risk – with car manufacturers (OEMs) in particular working closely with insurers.”

Most blockchain initiatives are expected to be carried on permissioned private blockchains rather than public blockchains and combined with Artificial Intelligence (AI) and its emerging ability to rapidly analyse and interpret unstructured data promises, these technologies are already the catalyst for changing the game in traditional insurance underwriting.