A blockchain is a digital record stored in encrypted blocks linked by a computer network. It uses a decentralised ledger to offer data security without relying on third parties. Its penetration into various industries, including insurance, has led to a new wave of innovations.
Blockchain in insurance improves efficiency and security, creating a better customer experience. This technology can transform the paperwork-heavy insurance industry into an automated digital system. Blockchain-powered storage systems are safer from fraud and theft. The claim processing process is also faster with blockchain technology, as it enables real-time data collection and analysis.
Many insurance companies have adopted blockchain technology and seen significant benefits.
Use case 1: claims processing
Blockchain streamlines and speeds up claims processes by the distributed ledger scheme. The ledger allows transparent tracking of the claim process from inception or First Notice of Loss (FNOL) until settled in court or otherwise resolved by the insurer. It contrasts the traditional processes that involve filing, validation, and approval manually, which can be time-consuming.
Blockchain enables policyholders and insurers to monitor each stage of the process in real-time. Customers gain more control over their data, including access rights.
Use case 2: fraud detection
Combating fraud could also be facilitated by blockchain technology. The immutable ledger used in blockchain can record transactions securely, and once the data is stored, it cannot be altered or deleted. This creates an auditable trail for all transactions, allowing insurance companies to identify suspicious activities indicative of fraud.
Blockchain can also validate the authenticity, ownership, and provenance of documents submitted while checking for police reports and claims history. This allows fraud detection linked to a specific identity possible.
Use case 3: policy management
Insurers can improve their policy management using blockchain. It can provide more secure and transparent data storage compared to traditional systems.
Blockchain technology streamlined the policy issuance process by employing smart contracts. Smart contracts are digital contracts that self-execute automatically when the parties involved meet the predefined conditions. This simplifies the administrative process and eliminates the need for intermediaries.
As a less human-dependent system, it also reduces the risk of errors or discrepancies. Human employees can then focus on more complex tasks and reduce overall operational costs.
Use case 4: reinsurance
Blockchain improves transparency and efficiency in the reinsurance market. Reinsurance involves transferring risks between insurance companies to mitigate and distribute risks while increasing capacity. Blockchain technology can simplify this process by allowing customers to submit claims similarly to traditional insurance policies but using the blockchain ledger. The security and transparency offered by the immutable and accessible ledger ensure the safety of this process.
Customers can also get a faster settlement of claims and contracts due to the streamlined process. Payments can be triggered automatically once conditions are met, reducing delays and increasing efficiency.
Use case 5: Peer-to-Peer Insurance
Blockchain ensures transparency and efficiency in Peer-to-Peer (P2P) insurance processes. P2P is a collaborative insurance model where a group of people can pool their resources to insure each other against specific risks. This model has various types, such as auto, life, health, and homeowner insurance, and is usually shared by family members or business partners.
Blockchain can facilitate enhanced security and transparency for P2P insurance policyholders due to the nature of the ledger used. The technology can encode P2P insurance terms and conditions into smart contracts, making it more efficient.
Using blockchain, P2P insurance customers can easily compare quotes from different insurance providers. Customers can also avoid concerns over hidden fees related to agents by using this technology.
Conclusion
Blockchain offers many ways for insurance companies to improve their management, services, and products. It provides a more secure environment, reduced operating costs, and efficient claims processes. Its vast potential for the insurance industry is expected to propel more adoption in the future.
- Blockchain
