Since its introduction, blockchain has been able to capture the imagination of every possible industry. The initial boost was a factor of the success of various crypto-currencies — but mainly Bitcoin. However, blockchain is no more constricted to the use of cryptocurrencies. Blockchain has developed beyond its initial applications, and a number of industries are now working hard to commercialize the technology to their benefit.
Experts have been definitive about the advantages that blockchain offers to any industry. Blockchain is capable of resolving issues of finances and logistics for a number of industries. The importance of blockchain rises manifold when a number of different stakeholders are involved in a single transaction. Above anything else, blockchain offers an unprecedented level of confidentiality, security, and transparency — characteristics that would be elemental in the insurance industry.
Blockchain in Insurance
At the very core of the blockchain technology is a distributed ledger. This ledger is where all the transactions are recorded and validated with the help of a series of encryptions. All transactions in the blockchain ledger are designed to toe the line of a fixed modus operandi. Every transaction in the blockchain ledger maintains a central data repository and is updated by few authorised personnel in the chain with each transaction.
Insurance can be defined as a contract — that is represented by a ‘policy’ — in which an individual or entity is given financial protection or reimbursement against a defined set of losses that the individual or entity might potentially face. It is a form of risk management and allows the company to prepare against unexpected losses.
One of the major issues that the insurance industry faces is that of transparency. The lack of transparency in the insurance industry has led to many disputes between insurers and customers. Therefore, it can be definitively stated that the potential of blockchain in the insurance industry is immense.
Usually, in a standard insurance contract, there are three parties involved — the insurer, the third-intermediary, and the customer. It often happens that the databases of these various parties may or may not be updated to the same point. But, blockchain can be an opposite answer to the issue. Furthermore, all the data and transaction entries can be designed to be validated by the representative of all parties involved. Therefore, blockchain has a strong future in the insurance industry.
Impact of Blockchain on Insurance Industry
Implementing blockchain in the insurance industry can solve a number of issues for insurers and customers. The most crucial of these influences can be discussed as below.
Enhance Efficiency: The entire process that an individual has to go through if they wish to change their insurance is a rigmarole that many actively work towards avoiding. A major reason for this is the lack of control that individuals have over the information that insurance companies hold. Blockchain is a fitting solution to this concern. While offering unmatched efficiency of operations, blockchain creates an incomparable wall of security that gives full access to the information while ensuring the information is secure when being transferred from one insurance company to another.
Increases Trust: Financial services across the world has been suffering a faltering level of trust among the common populace. Despite efforts from multiple fronts, the lack of trust is entirely palpable. Blockchain will bring in a factor of transparency and straightforwardness that could encourage a level trust among all parties involved.
Claims Processing: Blockchain and smart contracts can effectively resolve issues that has been plaguing the insurance sector since long. Most customers find that insurance contracts, forms, and other documents are long, confusing, and often unclear. Blockchain and smart contracts will help in creating an ecosystem that is transparent. This would ease the process of overseeing claims responsively and transparently combing out the possibilities of frauds. The entire process is triggered with the procedure that records and confirms contracts on the blockchain. The blockchain will ensure that only valid claims are brought through. In a situation where claims are repeated from the same incident, the application of blockchain would allow eliminating the repetitions to ensure that only legitimate claims are processed. The fact that only limited humans will have complete access to the data on blockchain ensures that claims are processed with much more speed and ease then otherwise possible.
Prevention of Frauds: One of the major reasons that blockchain is being rapidly integrated in the insurance sector is its ability to detect and prevent any form of fraudulent activity. Blockchain allows the storage of all transaction-related information in a decentralised set-up allowing a thorough check of authenticity for each policy transaction and claim.
Cost Saving: It is also important to note that the integration of blockchain will allow insurance companies reduce their operation costs significantly. The automation of processes such as verification of claims, the identity of policyholders, and the validity of the contract will help the insurance companies to reduce administrative costs significantly.
The blockchain technology has tremendous potential in the future and its implications are only growing exponentially. However, with increased integration of blockchain in more and more sectors there are bound to develop a few limitations. The insurance companies will have to ensure that they identify significant challenges as they emerge and apportion proper management.
About Fusion Informatics
Fusion Informatics is a company that understands the future of technology like no other company, allowing them to provide their clients unparalleled IT assistance. The team at Fusion Informatics works closely with clients to ensure that their corporate needs are met in the best possible manner. Blockchain is one technology that is still unravelling and has remarkable implications in the future. Fusion Informatics is committed to helping their clients finding their way around blockchain and using the technology to the benefit of their operations and overall functions.