Blockchain in insurance? Surprising, but true. Beyond cryptocurrencies, blockchain offers diverse applications, including health and insurance. Its unique features can help cut costs, improve customer service, and boost the bottom line for insurers.
It is imperative for CTOs and CIOs in the insurance industry to explore the untapped potential of blockchain technology to drive growth within their organizations. In this article, we will delve into the ways in which you can stay competitive in today’s dynamic marketplace by leveraging the advantages of crypto-insurance, blockchain-based insurance claims, and more.
Let’s dig in!
What is Blockchain in Insurance?
Blockchain technology is employed within the insurance sector, which involves the use of blockchain in insurance operations. Essentially, blockchain is a technology that allows for the creation of a digital ledger of transactions. This ledger is stored across a network of computers, enabling secure sharing and verification of information. One of the main advantages of blockchain is its ability to establish trust among stakeholders through the use of an immutable and transparent record of transactions. This ensures the reliability, security, and integrity of the shared information within the insurance sector.
Also Read : Role of Intelligence, Surveillance and Reconnaissance (ISR) in Modern Security
Key Benefits of Blockchain in Insurance
Blockchain technology offers insurance companies the opportunity to enhance security measures, lower expenses, instill trust, and gain immediate access to real-time data. Below are the primary advantages of blockchain in the insurance industry.
1. Reduced Costs
Blockchain tech cuts insurance costs through streamlined data and payment distribution. Real-time claim tracking replaces manual processes, minimizing reliance on intermediaries and third parties in claims handling.
2. Fraud Detection
Insurers increasingly use blockchain for fraud detection and risk management in insurance claims. It offers a secure and efficient method to verify documents like insurance policies and medical records, ensuring accurate customer information and protection against fraudulent claims or actions, such as identity theft.
3. Data Integrity
Blockchain aids insurers in ensuring data integrity, particularly by validating claim authenticity. This is crucial, especially for insurers leveraging big data for customer risk profiling.
4. Improved Customer Service
Blockchain securely records and tracks policyholder details, including claims history, premiums, and rewards. It enables real-time data collection on customer behavior, enhancing insurers’ ability to provide better service.
Blockchain in Insurance Use Cases
Insurers are delving into blockchain, alongside technologies such as AI and ML. Blockchain applications in insurance enhance efficiency and cut costs coupled with other benefits. Key blockchain use cases in insurance include:
● Smart Contracts and Payment Distribution
Smart contracts in blockchain automatically execute when contract conditions are met. They’re versatile, handling peer-to-peer insurance, KYC/AML, and escrow. They enable trustless insurance markets, eliminating the need for intermediaries. Buyers and sellers can agree on contract terms enforced by blockchain. Smart contracts can also swiftly automate claim payments in case of accidents, expediting the process.
● Insurance Claims Management
Claims management involves identifying, assessing, and resolving claims. Blockchain streamlines this process by creating a distributed ledger, tracking each transaction. This ledger helps monitor claims processing from initiation to settlement, simplifying progress tracking for all parties involved.
● Reinsurance
Reinsurance shifts risks between insurers, enhancing capacity and spreading it across multiple companies. Blockchain can streamline this process, enabling claims on an immutable ledger, and ensuring secure and unalterable records.
● Peer-to-Peer Insurance
Peer-to-peer (P2P) insurance directly involves consumers, spanning car, home, life, and health coverage. Incorporating blockchain enhances transparency and trust in P2P models. It simplifies quote comparisons, eliminating concerns about hidden fees or surprises from individual sellers or brokers. Blockchain records transactions in real-time, ensuring secure storage on multiple global computers, preventing fraudulent claims, and fostering transparency.
● Risk Assessment and Loss Control
Blockchain aids in monitoring risk and loss control, crucial for fraud prevention. Its potential for insurance companies extends to streamlining processes, ensuring smooth claims file management, and minimizing disputes between parties.
● KYC/AML Processes and Anti-Fraud Solutions
KYC/AML processes ensure customer identity and fund source verification, crucial for preventing fraud in an industry vulnerable to hackers. Blockchain can automate KYC/AML tasks, like bank account verification, streamlining processes and reducing duplication when dealing with new clients. This saves time and money in insurance claims departments.
Examples of Blockchain in Insurance
The insurance industry has a great deal to gain from implementing blockchain technology. In the insurance industry, numerous startups and platforms are revolutionizing the landscape by leveraging the benefits of blockchain technology. This has resulted in significant value being generated for the sector. Now, let’s look at some instances of the use of blockchain in insurance.
1. Ryskex
Ryskex, an insurtech firm, offers insurers a more streamlined and precise approach to evaluating and managing risks using its blockchain-powered platform.
2. Lemonade
Lemonade uses AI and DLT for innovative insurance solutions for renters and homeowners. With a fixed monthly fee, it allocates the remainder to future claims. To eliminate bias, customers are grouped by their chosen charity during sign-up, and AI algorithms verify claim legitimacy.
3. Black
Black is a blockchain-based digital insurance company that aims to revolutionize the insurance industry by providing empowerment to MGAs (Managing General Agents) and brokers. Their objective is to introduce crowdsourcing to the traditionally centralized insurance market.
4. B3i
B3i was established in 2018 to provide the insurance industry with innovative solutions that enhance customer experience by facilitating faster insurance access and minimizing administrative expenses.
Wrapping it Up
Today, blockchain in insurance holds immense potential and can bring about significant changes. Blockchain offers various applications that have the capacity to revolutionize the digital management, tracking, and insurance of physical assets.
Incorporating blockchain technology provides numerous advantages, including improved cost-effectiveness, decreased risk, and other valuable benefits. It is crucial for individuals in various domains, from business to academia, to recognize the significance of embracing blockchain on the pathway to success in the insurance industry.
Given the industry’s willingness to adopt new models and protocols, it is evident that blockchain is here to stay, even though it is still in its early stages.