Insurance has been around for centuries and for a thousand years, this sector has been transforming rapidly.
The first written insurance policy, called ‘bottomry,’ was used by Chinese and Babylonian traders in ancient times to protect from financial losses. We’ve come a long way since then, and are starting to This shows leverage digital effectively to cope with an emerging technological landscape.
In this race of disruption, the insurance industry’s major concern is fraud. Billions of dollars of fraud are recorded across insurance lines every year. This doesn’t mean insurance companies are not doing anything to stop fraudulent claims. Insurance companies have started making use of smart analytics and other methodologies to deal with false claims. Despite this, fraudsters continue to come up with more sophisticated ways to dupe insurance companies.
Technology is a game changer. It has changed the way businesses are conducted in the insurance industry. By leveraging blockchain expert solutions, insurance companies are able to achieve increased data security as well as a significant reduction in the overall claim processing time and saves costs. Blockchain in the insurance industry is projected to reach USD 1,393.8 million by 2023 at a CAGR of 84.9%.
So, let’s delve into the 5 key blockchain applications that are most likely to transform the insurance industry:
Blockchain analysis can help find and erase duplicate or potentially fraudulent activity. Blockchain’s inherent feature of capturing time-stamped transactions with complete audit trails makes it extremely difficult for fraudsters. A blockchain-powered risk ledger can replace authenticity certificates and streamline paperwork in order to avoid duplicate claims, double financing, fake replacements and false claims.
Insurance contracts are usually very difficult to process, being extremely long and confusing. Blockchain can help in making the whole process more transparent, benefitting all the parties involved. Checking how many claims were made for one particular accident, or checking the validity of any claim being made would all become a lot simpler with the incorporation of blockchain technology.
Moreover, even the payment of such claims would not require additional effort from employees as they would be processed automatically once they are checked out by using smart contracts based on the blockchain. Not only does this make the whole process faster, but it also eliminates the risk of human errors. Smart contracts can also lead to the promotion and use of “instant insurance products”.
Smart contracts can lead to a more P2P, or a crowdfunded insurance model. Blockchain would enable the usage of a shared platform for a group of customers, which would, in turn, help them share risks in a cost-efficient manner.The platform could be utilized by customers to make their insurance related demands, which would then be met by the insurer by using its risk management facility and calculating expected returns. A lot of the attention can be shifted from asset management to risk calculation. Blockchain and smart contracts would make the entire process simpler, more transparent and a lot cheaper.
As the Internet of Things is connecting more devices and appliances, users data collection has significantly gone up. Insurers are building products based on the Usage-based Insurance Models (UIB). The auto insurance company, for example, can make use of IoT technology and gather user’s data like their driving times, the distances covered by vehicles, acceleration and cracking patterns, and few other drivers behaviors to identify if the customer comes under high-risk or low-risk drivers category. Based on data collected, insurers can validate information and issue premiums accordingly to their customers.