Insurance Transformation: The Possibilities Of Innovating The Industry Thru Blockchain

For years, the traditional insurance business model has proven to be a surprisingly resilient one. However, traditional insurance is beginning to feel the digital effect as emerging technologies change the way consumers interact with businesses and how products and services are delivered. There’s a general perception that the global insurance industry lags behind other financial service sectors, leaving much to be desired in terms of cost-savings and efficiency. There are also major issues concerning fraud, human error, and cyber-attacks.

Enter blockchain technology: a distributed and decentralized public ledger that is the record-keeping technology behind bitcoin. Blockchain transactions are free to use and have the potential to completely change the way insurance is contracted. Blockchain optimizes efficiency, security, and transparency for the entire insurance industry, using public ledgers and fortified cybersecurity protocol. Many sectors already utilize this technology, including (but not limited to) companies providing and trading renters, homeowners, unemployment and travel insurance.

How does blockchain technology work?

For a block to be added to the blockchain, four things must happen:

  1. A transaction must occur
  2. The transaction must be verified
  3. The transaction must be stored in a block
  4. That block must be given a hash or a unique code

There are many advantages to using blockchain technology including improved accuracy by removing human involvement, greater user privacy and security, lower processing fees, and decentralization that makes it harder to tamper with the technology.

Blockchain is currently used by a variety of industries for many different reasons. Some real-world uses include connecting musical artists and licensing agreements (Spotify), keeping track of status and condition of every product in a supply chain via a shared record of ownership and location (IBM Blockchain), and even translating key insurance industry processes into blockchain-ready procedures (Accenture). However, the opportunities for blockchain are truly endless.

Blockchain technology meets the insurance industry

All things that lead to risk-associated steps in which information can be lost, tampered with, and misinterpreted.

And while blockchain is a hopeful solution, it won’t come without its obstacles. Insurance companies must overcome regulatory and legal hurdles before fully embracing blockchain technology. Several blockchain features could be inconsistent with current insurance laws. For example, personal customer data and their policy information residing on the blockchain must comply with existing privacy and data protection regulations. Also, decentralization strengthens information sharing and reduces the advantages that information asymmetry provides. This provides new challenges for management in pricing, product development, claims services and more.

Insurance applications for blockchain technology

By using shared ledgers and smart contracts (software that checks for certain transactions in the network and automatically executes actions based on pre-specified conditions being met) to issue insurance policies, the claims and payment processes can be automated to create more efficiency and accuracy. Smart contracts can turn paper contracts into programmable code that helps automate claims processing.

Health insurance

The health insurance industry is filled with inefficiencies in its processes, like duplicated medical records, manual claims processes, and inaccurate record keeping. There’s much to be improved in terms of efficiency and accuracy. Because of this, the interoperability of systems and devices is crucial to ensuring that medical professionals provide sufficient care to patients, but successfully achieving interoperability within a medical system isn’t easy.

With blockchain, medical records can be cryptographically secured and shared between health providers, promoting interoperability and increased security within the health insurance ecosystem. Patient medical records can be stored safely and return control of medical data to patients, allowing the industry to save money and increase patient satisfaction.

Fraud detection & risk prevention

The outdated nature of the insurance industry’s processes leaves room for error and potential fraud. To combat this, insurance companies could store claims information on a ledger that would help them communicate and identify suspicious behavior.

The impact of blockchain technology

Benefits:

  • Increases trust — Cryptography in blockchain ensures that transactions are secure, authenticated and verifiable, ensuring customer privacy.
  • Claims processing — Blockchain enables real-time data collection and analysis, which could make significantly speed up claims processing and payouts.
  • Smart contracts — These programmable contracts contain logic that is automatically executed when predefined conditions are met.

Moving towards a blockchain-powered insurance industry

What’s next for the future of insurance?

Because the industry has high privacy and security concerns, blockchain must be developed further to meet the standards of insurance companies before it’s feasible. Also, insurance companies must provide clear regulations frameworks to safely utilize blockchain technology. Once these needs are met, blockchain can transform the insurance industry for companies and their customers.

Introducing Inmediate: a platform on which customers, distributors and insurers using smart contracts connect. https://inmediate.io