The advantages and risks of blockchain technology will be become clearer over the next three to five years, Fitch Ratings says.

Blockchain is considered a potential game-changer for the insurance industry over the long term, but the likely extent of its adoption remains unknown and it is not expected to affect insurer ratings soon.

“Part of the challenge is that investment costs relative to benefits are uncertain and there are numerous legal, regulatory and security issues that need to be addressed to facilitate wide-scale adoption,” the ratings agency says in a report.

“There is also no particular urgent crisis that blockchain would address to necessitate immediate application.”

PWC and blockchain-focused industry group B3i have indicated potential savings may range from 15-30% of current annual expenses.

Fitch says large numbers of complex transactions between multiple parties make insurance fertile ground for blockchain, which could improve processing speed and enhance underwriting and pricing while reducing fraud.

“Efficiencies and cost reductions could be achieved by reducing the need for reconciliation and audits, automating certain processes and improving access to data.”

Blockchain’s viability for the insurance sector will depend on a group of industry leaders adopting it to gain competitive advantages, Fitch says.