The application of blockchain across the various sectors of the industries is much-talked matter since the inception of blockchain; insurance also falls well within the periphery of such a discussion. Though some critics argue the fact that blockchain only makes a marginal difference and the technology is mere hype, but on the other hand, supporters cite the innumerable benefits that the blockchain technology has brought in that has already disrupted some of the existing systems. In this article, we shall discuss how blockchain can bring in revolutionary changes in the Insurance sector.
Benefits of Blockchain in insurance
Some of the benefits of blockchain in the Insurance sector are discussed hereunder.
As per the existing insurance policies, the policyholders do not have access to their data stored in the databases of the insurance companies and they are paid whatever the insurance companies decide to pay. Moreover, if their (policyholders’) information is shared with the third parties, they are not even notified about that. This is high time that these policies should be changed, and more transparent policies should be brought in. The decentralized and open nature of blockchain technology eliminates these loopholes and the customers can have access to their data and will be notified about every single operation done.
Under the existing insurance policies, the customers sometimes need to wait for days to even weeks for the payouts to reflect in their accounts. Using blockchain-enabled fiat currencies and tokens, these issues can be solved almost instantly. Payouts can be made immediately and can even be reused for buying additional coverage.
How Blockchain will give power to insurance?
Blocking False Claims
The most significant issue that the Insurance Industry is facing right now is fraudulent claims. Though there are smart analytical techniques to identify false claims, there always remain some loopholes and more sophisticated technologies that the hackers utilize to dupe the insurance companies. The use of DLT (distributed ledger technology) will help in reducing fraud. The inherent feature of the blockchain technology to capture time-stamped transactions with audit trials will make it difficult for the fraudsters to dupe any transactions and create false claims.
Improved Customer Experience
Nowadays, with eons of options available, customers do not always tend to cling on a single insurance service provider. In such a scenario, winning the customers’ confidence without compromising the price margins has become a challenging task for the insurance providers. Lower premiums and innovative methods such as on-demand insurance coverage and pay-per-use can draw more customers. Therefore, insurance companies are now looking forward to implementing such technology that can take care of these things. Blockchain is steering the insurance market through essential drives like automated processing and smart contracts to solve these issues and to bring in more customers. Business agreements are created in the blockchain and payments are auto-processed as soon as certain pre-defined conditions are met. This saves a lot of time, effort, and money and needs no manual intervention.
Blockchain technology has a robust potential to empower the insurance industry with its secure connecting capabilities. It can create new distribution models like P2P or peer-to-peer insurance that could restructure and reform the entire insurance market. With the help of P2P insurance, the policyholders are entitled to a more significant portion of the premiums.
Transitioning to Digitization
Age-old insurance policies are losing their importance in this tech-savvy era when the modern generation are looking for fast and secured digitally-enabled policies. To steer through this present-day dynamic market, insurers need to offer innovative policies to attract the new-age customers. Blockchain can provide ready solutions to the insurers through its innovative concepts like Parametric Insurance and Micro Insurance that uses hi-tech technologies like “Smart Contracts” and IoT (Internet of Things). The idea of “connected devices,” also provides a broad scope for new insurance models. Anti-theft connectors can trigger an automated insurance claim as soon as some conditions are met. Even if 10% of the cover can be auto settled immediately when a theft is detected, the time for settlement of the rest of the claims and the also the cost of operations can be reduced to a manifold.
For all these reasons, the Insurance industry is trying to inject some innovative measures through the blockchain technology, that can bring in some revolutionary changes that the industry has been seeking for decades but is unable to create. Blockchain seems to be the perfect solution for this.