Blockchain in insurance is a hot topic in business and finance, and companies are starting to use the technology in their systems. On the other hand, insurance companies are a competitive marketplace where retail and business customers hope to get value for their insured properties.
But will blockchain technology has a significant effect on insurance in any way?
Based on what has happened in other industries that have used blockchain technology, insurance companies could be a fertile ground for doing very well when they entirely use blockchain technology in their operations.
The way blockchain in insurance has changed several industries, especially AI, shows that it is a platform that can have a big impact when it is fully used.
This article will talk about what blockchain can do for insurers, how it can be used in the insurance industry, and which companies are already using blockchain technology.
Introduced the Insurance Industry to Blockchain
AdvisorSmith’s report from 2020 says that more than 30% of small businesses were not insured. One reason is that the traditional market is hard to navigate because it has complicated claim processes.
When insurance companies do business with their clients, the transactions are often complicated. Adding blockchain to their system will help improve the speed at which transactions are processed, reduce costs, increase transparency, improve underwriting and pricing, and drastically cut down on fraudulent activities while letting both the insurance companies and their clients do business in a more trusted and open way.
Also, blockchain will help small businesses build customer trust because all transactions are recorded in a digital ledger that can’t be changed once it’s been confirmed. Small companies won’t have to worry about getting complicated documents together because the blockchain will do it for them automatically.
Benefits of Blockchain in Insurance
Using cryptographic security protocols, the blockchain can make it easy for insurance companies and customers to do business without a middleman. The public blockchain ledger can be used to share authorizations and transactions with counterparties instead of sticking to the slow workflow used in the traditional sector.
Here are some of the main reasons why blockchain is good for insurers:
- Regardless of their numbers, customers’ data can be securely captured using a remote electronic device.
- The introduction of speed and transparency among counterparties.
- Automating critical operational functions will contribute to more effective and efficient performance.
- Reduces operating costs and enables businesses to deliver more quickly and without delays.
Blockchain in Insurance Market
In addition to the benefits that blockchain in insurance company, these are ways that organizations can use it to help them do well for a long time. They’re;
Transparency and Fraud Prevention
According to FBI reports, fraud costs the insurance industry more than $40 billion every year because normal methods can’t be used to find fraud.
Using blockchain will help put records of financial transactions on the public ledger so they can’t be hidden because they will be time-stamped and last forever. Because blockchains can’t be changed, it will be easier for law enforcement agencies to keep track of important information that can’t be changed.
Everything will be clear, and since all insurance companies use the same blockchain ledger, they will all know which claims have been paid.
Before blockchain was used in the insurance industry, contracts were set up and passed around with the help of underwriting agents and insurance brokers. With the help of smart contracts, no one will have to do any work. This is because smart contracts can be made to automatically carry out transactions through a blockchain as long as the contract terms are met.
Since all transactions are recorded on the blockchain using smart contracts, unintended mistakes in the contract will be less likely to happen, making the transaction safer and more open. This is because everyone can see every transaction on the blockchain. Since there will be no manual assessment, all claims, issuance, verification, coverage analysis, and settlement processes will be done quickly and easily. The insurance industry will become more efficient, and customers will have more faith and trust in it.
Microinsurance is a way to protect against certain losses in exchange for regular premium payments. Profits are only paid out in large amounts. In a traditional setting, it usually takes a long time before those profits can be shared, and it costs a lot to share them, so the profit margins aren’t very high.
Using blockchain will help the distribution process by handling claims and underwriting based on the rules in the microinsurance policies put on the blockchain.
People who don’t qualify for insurance coverage can use the power of decentralization and independently process the smart contract, as long as it meets the terms of the agreement, to insure themselves at a lower cost.
Traceability and Ownership Proof
Assets like houses, cars, land, etc., will be appropriately recorded on the blockchain public ledger so that insurers can track information about the value of their assets through an internal currency token transfer.
When data from health insurance companies and hospitals are synchronized on the blockchain, it will be fast, safe, cost-effective, and accurate for both parties without compromising the privacy of the data. It will no longer be possible to change a patient’s medical report because both sides will be able to see everything.
Companies Already Using Blockchain Technology in Insurance
ClaimShare is an insurance company that lets insurers work together to improve their fraud detection systems while still protecting the privacy of both their businesses and their customers. When a suspicious claim is found, it uses Intel Software Guard Extensions (Intel SGX) to match private customer data.
It has a Corda layer that acts as a distributed ledger between insurers so they can share their public claims data in real-time and in a way that can’t be changed. Corda is a blockchain platform for the next generation. It offers privacy, scalability, and security, and it was made for highly regulated institutions.
ClaimShare also uses blockchain technology so that insurers can test data right away without having to integrate or deploy anything.
Ryskex is a company that offers insurance services based on the blockchain. It helps insurers accurately assess and handle risks by letting them transfer tokens of their currency, which makes transactions easier.
JP Morgan made the Ryskex Quorum blockchain technology so that contracts and claims regulation could be more closely watched and done quickly. Its automated claims process and smart contracts improve agreement and transaction security, claim verification, trust, and reliability without a middleman.
Also, Ryskex’s parametric solution predicts and defines the effect of risk by using artificial intelligence. It makes sure that claims are only made if an event has been proven to have happened by a third party.
Lemonade turns the traditional insurance model by using AI and blockchain to offer homeowners and renters cheap insurance.
The money paid in premiums is treated with care because it belongs to the owner. Lemonade takes a flat rate fee out of all monthly payments and uses the rest to pay claims. The smart contract insurance in the lemonade blockchain checks customers’ losses right away to make payments quickly.
With the use of blockchain technology by Lemonade, everything is made straightforward.
In 2018, the B3i reinsurance company was created with underwriting rules that can structure the majority of catastrophic excess of loss contracts traded on the market. This is done by letting customers negotiate and place treaties using the benefits of distributed ledgers. This makes it easier to get to customer transactions quickly and lowers the cost of running the business.
One of the main reasons for putting blockchain technology into B3i is to fix how data is exchanged and processed in the insurance industry.
With the ability of blockchains to protect financial records from being changed, there will be no room for fraud, giving customers fairness and transparency. It will be hard for insurance companies to hide their income, and it will be easier for insurers to keep track of transaction records.
As more people look for ways to make traditional processes better and fairer, there will be no need to file claims in the future because all processes will be handled automatically by smart contracts. And since the use of cryptocurrencies seems to be growing worldwide, insurance policies for crypto-funds may become available.