Blockchain seems to be the hottest topic in the rapidly changing world of Fintech. And the transformation of the Insurance industry with blockchain predominantly tops the charts. While the technology has the potential to “live up to the hype” and reshape the Insurance industry, it also requires careful collaboration with other emerging technologies, regulators, incumbents, and additional stakeholders to be successful.
Some of the First Mover Insurers (Trailblazers) are looking to blockchain to help drive wider transformation by focusing on access to trusted information and redesigned business models. These Trailblazers not only see the value in participating in the broader financial services blockchain ecosystem, but they also see blockchain as an opportunity to improve efficiency, lower the costs of transaction processing, enhance the customer experience, improve data quality, increase trust between parties and support auditability, among other benefits
Benefits of Blockchain in Insurance
Global Blockchain in Insurance Market accounted for US$ 177.85 million in 2020 and is estimated to be US$ 39.56 billion by 2030 and is anticipated to register a CAGR of 72.4%. The global Blockchain in Insurance Market is segmented based on Sector Type, Enterprise Size, Provider, and Deployment Model.
But how can this technology really help Insurance firms? The following are a few of the very practical blockchain based use-cases for the insurance industry –
2. Smart Contract
3. IoT and Blockchain
5. On-demand insurance
In the US alone, fraudulent claims account for more than $40 billion, which is excluding health insurance. All said and done around adopting digitization, the US insurance industry still grapples with the challenges of fraud detection.
Blockchain plays an integral role here.
Blockchain ensures that no one, including insurers, can modify the data preventing any kind of breaches. All the executed transactions are permanent and timestamped. When the data is intact, it further helps in defining patterns of fraudulent transactions, making it easy for insurers to detect fraud.
Smart contracts have completely eliminated the need for human intervention like insurance brokers or underwriting agents. Now, the terms of agreements between policyholders and insurers are written into the code upon which smart contracts are built, ensuring no manipulation or errors in the contract.
This increases the efficiency of the insurance sector and builds consumer trust and confidence in the industry.
IoT & Blockchain
The IoT devices generate a significant amount of data that is extremely valuable for insurers. It helps them to develop accurate actuarial models and usage-based insurance models. But, the question is — how to manage the enormous data as millions of devices are communicating every second.
And the answer is a chain!
As the technology develops, it can be used for issuing high-valued items that are too risky to insure conventionally. Since it allows users (insurers) to manage large and complex networks on a peer-to-peer basis. Instead of building expensive data centers, blockchain offers a decentralized platform to store and process data.
Reinsurance is insurance for insurers. It protects the insurers when large volumes of claims come in.
When insurers and reinsurers share a blockchain ledger, detailed transactions around premiums and losses get updated on an insurer and reinsurer’s computer systems at the same time. This saves time and money, and reinsurers can also automate settlement and claims processing.
In on-demand insurance, policyholders can turn on and off their insurance policies as per their needs. Therefore, it requires underwriting, policy documents, buyers’ records, costing, risk, claims, and so on much more than traditional insurance policies.
But, with blockchain technology at its disposal, maintaining ledgers (records) has become simpler. On-demand insurance players can leverage blockchain for efficient record-keeping from the inception of the policy until its disposal.
In conclusion, Blockchain in insurance can be a game-changer, can reshape the way physical assets are tracked, managed, and insured digitally. The use of blockchain in insurance can also lead to increased automation allowing for improved customer experience and relationships.
At InfoBeans, our highly-experienced team of professionals helps you step into the world of decentralized solutions, and deal with complex situations in your journey.