Blockchain technology is now ready to be explored by insurance companies. Traditional insurance relies heavily on contracts written on paper. Additionally, customers must contact a phone number to find out about the latest policies.
Additionally, the risk of making mistakes is high, and data collected manually could be misinterpreted or lost. This is where Blockchain in insurance is the picture to revolutionize the traditional insurance business.
How Can Blockchain Benefit the Insurance Industry?
Blockchain technologies can result in substantial efficiency improvements in transparency, speedier payment times, cost savings, and even fraud prevention while allowing data sharing in real-time among multiple parties in a secure method.
Blockchain also allows for innovative insurance practices to create more efficient markets and products.
1: Blocks false claims
The most prominent issue in the insurance business is fraud. Per the Coalition Against Insurance Fraud, Americans suffer $80 billion in damages every year because of fraud in insurance.
While insurance companies utilize sophisticated analytics and other methods to counter fraudulent claims, fraudsters continue to develop more sophisticated methods to trick businesses.
The inherent feature of Blockchain that it captures transactions time-stamped and accompanied by complete audit tests makes it very impossible for fraudulent actors to commit fraud.
A blockchain-powered ledger could be used to keep track of data related to expensive items, such as jewelry. The ledger could replace authenticity certificates to prevent duplicate, counterfeit, and fraudulent insurance claims.
2. Enhances customer
Enhances customer experience by ensuring loyalty to a single service provider is no longer required. Customers are looking for companies that offer lower prices. Fierce competition from players offering innovative solutions such as insurance on demand can be a source of stress for traditional insurance companies.
In these situations, gaining customers’ trust without sacrificing price margins is now a must.
One approach to tackle this is using Blockchain to automatize processing using smart contracts.
Business contracts are integrated into the blockchain model, and automatic payments are triggered after certain conditions are met.
3. Increases trustworthiness:
One of the significant benefits of using Blockchain in insurance is the ability to build trust between various entities. The fundamental feature of consensus algorithms embedded in Blockchain allows for the immutability of audits and immutability.
These algorithms help build intelligent contracts using Blockchain, which can benefit insurance companies. Additionally, smart contracts facilitate rapid, transparent, and reliable transactions because the Blockchain can be a permanent ledger.
When an industry utilizes an open claims ledger that allows inspection, with no charge per transaction, this can help reduce the risk of fraud. Regulators can track every insurance aspect in real-time in the ledger, making auditing more accessible and efficient.
4. Allows for more excellent automated processes:
Smart contracts speed up the insurance process and facilitate transparent transactions. The entire process of claiming insurance runs smoothly because the Blockchain operates according to the smart contract terms.
Even more exciting is that it does it intuitively, making automation an enormous benefit for insurance firms. In the end, Blockchain helps save time, effort, and even money by reducing administrative costs for insurance companies.
5. It helps collect and store valuable information insurance companies benefit from data.
Blockchain technology can gather vast data that can be used in techniques like artificial intelligence (AI) and the Internet of Things (IoT).
The data collected through IoT is saved on the Blockchain. It is then processed by AI, which helps your company make educated decisions about the cost of insurance.
IoT devices also allow you to keep track of a vehicle’s performance and ensure insureds are eligible to receive discounts for safe drivers. They also provide your insurance company with more information about your vehicle’s performance and the drivers’ habits.
With such tremendous advantages, the insurance industry is looking forward to harnessing the latest technology to bring about positive growth and change.
How can Blockchain Impact the Insurance Industry?
Impact on Registration of Warranties and Expensive Items Blockchain provides accurate product information to benefit all involved. In addition, it assists in an industry-wide effort to stop fraud claims. It also tracks the claims on items and their owners in real time.
1: Impact on AML/KYC Methods
Blockchain protects the customer’s information and can be shared between businesses. Furthermore, using Blockchain decreases the chance of errors and duplicate KYC work.
In addition, it helps improve client actions’ transparency across organizations and provides more consistency.
2: Impact on Index-Based Insurance
Insurance based on indexes or Parametric insurance offers pre-listed payments according to trigger events.
Blockchain could help automate the entire index-based insurance component. Additionally, blockchain technology is able to handle and clear all transactions without any manual intervention.
It also helps with settling insurance claims, cancellation of flight delays, flight cancellations, food crop insurance, and much more.
3: Impact On Claim Handling
Utilizing Blockchain technology in the insurance industry, you can build a reliable list of claims. Insurance owners can also grant access to their information at their discretion. It also can create data silos (vaults) to limit the risk of fraud on claims.
4: Impact On Insurance Distribution
Blockchain lets you make transactions for claims quickly. Furthermore, Blockchain aligns the actions of multiple parties at a reasonable cost. Users also have access to all carriers, allowing them to handle other policies from one platform.
5: Impact on Data Collection and Storage
In the Blockchain, Data can be stored as blocks once it’s saved and is not able to be altered. Blockchains can store information using other technologies, such as the Internet of Things (IoT) and Artificial Intelligence (AI).
For example, a business might offer a lower cost for health insurance based on factors such as oxygen saturation or sleep duration.
IoT devices collect information that is later stored on a Blockchain. The business will employ AI to analyze the information stored in the Blockchain and decide on the insurance premium.
What are Smart Contracts in Insurance?
Smart contracts permit blockchain users to transfer essential items without intermediaries. The distinctions between the physical as well as smart contracts used for insurance are as below:
- Physical contracts can take anywhere from 1 to 3 days, while intelligent contracts only take a couple of minutes.
- There’s a requirement for a middleman or lawyer in the actual contract. However, at the same time, a lawyer is not required for smart contracts.
- Physical contracts can be expensive; however, intelligent contracts are pretty affordable.
In essence, Smart contracts are programs stored on a blockchain executed when pre-defined conditions and terms are. Furthermore, smart contracts are incorporated into the Blockchain to ensure they are safe, traceable, and transparent.
The insurance industry’s future is predicted to be USD 1,393.8 million at the close of 2023. Blockchain is an ideal method of transferring money in the insurance industry because it provides transparency, clarity, and safe transactions.
Thus, using Blockchain in the insurance industry will result in cost savings, faster payment auditability, and better accuracy.