Blockchain will support, not replace, title insurance, according to a commentary published by A.M. Best.
In an April 5 commentary entitled “Blockchain: Enabler for Title Insurance; Not a Replacement,” A.M. Best Director, Industry Research and Analytics Sridhar Manyem said clients always will need an insurer behind the Blockchain that can compensate them and defend property rights.
The commentary notes that “a successful Blockchain implementation in the title insurance industry has the potential to reshape title insurers’ processes and business models to offer significantly improved insurance products to customers. In particular, among other benefits, it could streamline the title search process and increase the accuracy of searches during the underwriting process.”
A.M. Best points out that implementing Blockchain will have its challenges, including information technology teams establishing procedures and training for employees.
“The final design of the Blockchain, the geographical scope of the distributed ledger, the width of records, and how it scales up will be key to its acceptance,” the commentary said. “Equally important will be the dialogue with regulators and state and county officials as to the protection mechanisms and plans for dealing with privacy issues.”
The commentary noted that Delaware, Illinois, Arizona and Vermont already have taken steps to clear the legal pathway for Blockchain.
A.M. Best said Blockchain provides the advantages of traceability, efficiency and enhanced security.
“In order to realize the value of the Blockchain, current title systems and land records will need to be converted into distributed ledger systems,” the commentary stated. “The theme, ‘garbage in, garbage out’ is still valid, and any fraudulent or erroneous records would be transferred as such. The due diligence process would be as necessary as before.”