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04 September 2018
Blockchain is a relatively new form of technology that acts as an incorruptible digital ledger and keeps a virtual record of all data and transactions.(1) Broadly speaking, as a digital ledger, blockchain can record a wide range of quantities, from physical assets to electronic cash.
Over the past few years, India has seen a few segmental adoptions of the technology, with some public authorities and private entities acknowledging its potential benefits, including the Insurance Regulatory and Development Authority of India (IRDAI).
Insurance business is built in large part on policyholders' trust in the accountability of insurers. Incidents that compromise the protection of policyholders' personal and proprietary data may not only result in regulatory consequences for the defaulting parties, but also undermine the policyholders' confidence in the sector. Since the technology and design of a blockchain is broadly believed to be secure, the integration of blockchain into insurers' databases may help to cater to the sector's need for data integrity and management.
Recent press reports have indicated that some Indian insurers have started contemplating various ways in which to implement the technology. It is reported that a consortium of the 15 leading Indian life insurers has partnered with a global technology firm to develop a blockchain solution facilitating cross-company data sharing for the specific purpose of reducing fraud and money laundering in the sector.(2)
Notwithstanding the foregoing, not all blockchains are created equal, and it is imperative to consider whether the technology could be considered at odds with the existing data protection and security regime in India.
The IRDAI has on more than one occasion stressed the need for data security and storage in the insurance sector and issued various circulars and guidelines in this regard. In 2015 the IRDAI set out the Guidelines on Information and Cyber Security of 7 April 2017 (Cybersecurity Guidelines). These guidelines require all insurers to put governance mechanisms and requisite IT infrastructure in place to ensure the security of all data created, collected, maintained and shared, irrespective of its form or place of storage.
However, implementation of a new technology such as blockchain may not necessarily completely comply with the existing insurance statutory and regulatory framework. Thus, below is an analysis of the Cybersecurity Guideline's framework for blockchain technology, bearing in mind its potential use in the Indian insurance sector in future:
In the wider data protection context, certain additional challenging questions are raised by this technology:
While the collective effect of the existing Indian insurance statutory and regulatory framework on data security is to minimise misuse and unauthorised tampering of any organisational data belonging to insurers and other entities, it will be interesting to see whether the new technology is discussed or accommodated for within the existing guidelines.
It is still too early to comment on whether and to what extent the insurance sector will assess this technology to meet its data security and integrity requirements going forward.
For further information on this topic please contact Celia Jenkins, Anuj Bahukhandi or Swathi Ramakrishnan at Tuli & Co by telephone (+91 11 2464 0906) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Tuli & Co website can be accessed at www.tuli.biz.
(1) Blockchains are comprised of a linear chain of blocks, created by linking new blocks of validated entries to older blocks, which successively reveal each transaction made in the history of that blockchain. Subsequently, this chain is continually updated so that every database in the network is the same.
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