Versatility, immutability, transparency, security and safety, all these words are synonymous with blockchain. It’s an undeniable fact that blockchain is insanely finding application in almost all the business niches. This brings me to yet another industry, the insurance companies. Although it may sound astounding the fact of the matter is that blockchain is steadily gaining pace in the insurance industry.
The amalgamation of blockchain and insurance is not only the topic of discussion but also the high point of conversation amongst the investors, technology providers and insurance providers.
What makes blockchain trending?
There are many reasons which make blockchain a topic of discussion. Every transaction in blockchain is time-stamped making it very easy for everybody in the system to trace the origin and destination. All these features make blockchain such a trending topic and a hot selling technology. It also forms the basis for various applications which are for public benefit. The demand of blockchain is now growing with each passing day making people discuss it. Let’s get back to the merger of blockchain with the insurance industry and try to understand, how these features of blockchain will benefit the insurance industry?
In the case of the insurance industry, the database is the key. The blockchain is not a substitute to the database instead it is the internet based smart database which is much more secure and safe as compared to what we have today. The inherent features of blockchain offer series of benefits to the insurance companies, the likes of which include :
- Simplification of processes
- Lesser turnaround time
- Reduced premiums
- Fraud prevention
- Repository of the database which can be easily accessed by the people in the network
- Better claim experience
- Improved KYC compliance
Possibilities for blockchain adoption by the insurance industry
Lessen the identity theft: One of the major problem faced by the insurance industry is false claims, fraud detection and the time taken to validate each application. Here blockchain might come as a solution. It can serve as a distributed register which has both internal and external customer data. Once the system is in place, the information once digitally entered, the platform would automatically validate the documents like address proof, medical reports, etc. It will not only speed up the entire process but at the same time, it will reduce human intervention thus minimizing the probability of errors.
Decentralized data repository: One of the major problems bother all the business niches is the security of the data. All the current system that we are using whether, in the banking industry or the insurance or healthcare, there is always a possibility of exposure of data to the third party. We have recently heard many cases of data being hacked. Blockchain can emerge as a solution for the same. Unlike the current system, in blockchain the data is not present at a central location thus, making it safe and secure. Furthermore, the information here is encrypted thus maintaining anonymity.
Cost-saving opportunity: As per the report of PwC, blockchain because of more efficient data processing and reduction in fraud can remove 15%-25% of expenses incurred during the insurance process thus saving around $5–10billion.
Blockchain in various insurance verticals
Now I would be highlighting the fact about how blockchain will be beneficial in the different insurance sector. We all know that getting the insurance claim can be a mess and a cumbersome affair. To cut down this, we need processes which are streamlined and interconnected; blockchain offers a series of benefits which will catalyze the entire process of the insurance industry. Here is how it can happen-
- Blockchain in Health Insurance- Blockchain is all about data management, by interconnecting all the medical care facilities, insurers, patients, physicians, etc. blockchain can improve the level of care the patients Moreover, it will streamline the entire process as all the data is in a central repository.
- Blockchain in Auto Insurance- There are two ways via which blockchain can prove to be beneficial for the auto insurance industry. First, it can connect all the users, service providers, with the help of shared ledger all the information will be readily available. It will help the auto insurers in reducing risk and fraud. Second, with the help of smart contracts, the claim will fasten up.
- Blockchain in Life Insurance Industry- Life insurance may sound a very simplified and easy process. However, getting the claim from the insurance company is a daunting task. It makes you face a series of questions, innumerable paperwork and make you spend your time, money and energy. However, with the help of blockchain, we can expect some relief here. By creating a consortium of medical facilities, government agencies, etc. one can get all the information easily. Moreover, insurance companies can use smart contracts to issue automatic payouts to medical facilities and other beneficiaries.
- The Bottom Line
Although we are looking at blockchain with tinted glass, at the same time we cannot ignore the fact that it does have its series apprehensions surrounding it. The blockchain is a technology which still lacks regulation and government control. Moreover, the development that we are talking about is still futuristic, and its practical application in the mainstream is yet to come. However, it does hold its own sets of benefits making it a great and promising technology for insurance along with other sectors.