The insurance industry has continued to experience the digital impact as emerging technologies are changing the way consumers interact with businesses. Blockchain has the capability to change how insurers do their business. It has helped insurance companies to improve transparency, save time, cut costs, comply with regulations, as well as build better policies focused on specific individual needs. Here is what you should know about blockchain in the insurance industry.
What Is Blockchain Technology?
A blockchain is a distributed register used to store static records or dynamic transaction data. It doesn’t utilize central coordination but rather a consensus-based mechanism to assess transaction validity. These transactions are completely free to use and possess the potential to completely change the way insurance is usually contracted.
As the Bitcoin backbone, blockchain was the first-ever solution to the double-spending challenge without a central administrator. Indeed, it usually optimizes efficiency, security, and transparency by utilizing public ledgers and fortified cybersecurity protocol.
Uses of Blockchain in the Insurance Industry
Blockchain continues to address the competitive challenges faced by many incumbent insurers, including poor customer engagement, limited growth of mature markets, as well as the trends of digitization. By incorporating artificial intelligence and machine learning, it has many benefits to insurers. Here are some of the uses and benefits of blockchain in the insurance industry:
Insurers must ensure that the submission and processing of claims remain consumer-friendly. This is usually instrumental for maintaining an edge over the competition within the insurance industry. Blockchain combines numerous data points from various sources to reduce the number of fraudulent claims.
A distributed ledger serves as a key focal point for many streams of data and documents, such as scene evidence, police comments, and third-party reports. Through blockchain, some claims submissions can be automated. For instance, a car crash can automatically trigger a new claim initiation, while contacting medical and mechanic support at the same time.
A smart contract includes a digitally signed and computable agreement between two or more parties. Smart contracts are very essential for the insurance industries because it usually involves an agreement between two or more people. An insurer, a customer, and a third party can easily execute and enforce the terms of an agreement by utilizing blockchain-enabled smart contracts. These smart contracts allow insurance information to be shared and executed in a secure manner.
Innovate Products and Services for Growth
Blockchain facilitates the growth of insurance companies by improving customer engagement, enabling cost-efficient product offerings for emerging markets, and enabling the development of insurance policies related to the Internet of Things (IoT). It also offers insurance a distributed and reliable platform for customer-controlled personal data and peer-to-peer (P2P) insurances.
Blockchain helps insurers improve customer engagement by providing a greater degree of transparency. In emerging markets, P2P blockchains with smart contracts then apply to micro-insurances to offer low handling costs. For IoT, cars, electronic devices, or home appliances can have their distinct insurance policies registered and administered by the use of smart contracts in a network. This makes it possible to automatically detect damages, trigger claims, and payments, or initiate the repair process.
Reduce Administrative Cost
Blockchain helps insurance companies to reduce administrative and operations costs via automated verification of policyholder’s identity and their contract validity. Auditable registration of claims and data from third parties, and payouts for claims via a blockchain-based payments infrastructure. For instance, insurers access encrypted transactions of patient data between a doctor and an injured party to verify payment. Thus, controlled access to registered claims on a blockchain improves transparency for the reinsurer in an automated and auditable way. This approach reduces both administrative and operations costs in the insurance industry.
Learn More About Blockchain
Now that you understand the use of blockchain and its benefits to insurers, let’s know how we can help you make the digital transformation. Kindly contact us today.