One has witnessed a huge leap in the insurance sector over the years. And with innovative technology such as the Blockchain disrupting it furthermore, it would scale to new heights in the years to approach.
According to a research, it has already turned out to become the largest industry worldwide with a market share of $1.2 trillion and still counting. The Blockchain technology has started to fuel a number of industries and the insurance sector is reaping benefits from it. We have seen in the past how people claim for false insurance because of which the insurance companies had to incur huge loses.
If we perceive from the customer’s viewpoint, then claiming for an insurance policy has always been one of the daunting tasks. Moreover, the customers complain that insurance companies often delay in making the payment. So, the Blockchain Solutions is rightfully there to sort out such issues.
Blockchain is a distributed peer-to-peer ledger records which are known as the blocks. Every block is connected with the previous one using a highly secured cryptography that is virtually incorruptible. The blocks even have a time and date stamp recording the transactions between two parties with no involvement of any other person.
The advantage with Blockchain is that it is free from controls and all sorts of regulations, plus it also maintains the transparency; means anyone can view the records of the transaction since it is stored in each of the nodes within the network.
Therefore, let’s now analyze how the Blockchain is disrupting the insurance sector:
1. Solving the Problem of Claim Process
I have already mentioned clear that insurance claim process has been a problematic area for both the company and the customer. Often the consumers faced problems related to delay in payout because the companies try to drag it unnecessarily. There is no transparency factor and the process is also quite complicated.
However, ever since the arrival of Blockchain technology there has been visible changes. The introduction of Smart Contracts has brought a huge relief for the user as it a contract developed on the basis of Blockchain. In this process of Smart Contracts, the rules and regulations are laid beforehand and which needs to be strictly followed, failing which you cannot precede further.
Often the insurance companies add such long and perplexing clauses that are difficult to understand and if the customer is not aware of it, the company may deny making the payment. But in an insurance contract, the clauses are clearly defined and recorded in the Blockchain that both parties agree upon.
So, following all the events and meeting with the entire terms and conditions, the payment is done to the policyholder. Since no third party is involved in Blockchain, so it cannot take any undue advantage of a situation.
Even you can make automatic insurance claim and you don’t have to involve any other person in the process. The entire process is fast, accurate and transparent. This has indeed helped a great deal to get property or vehicle insurance.
2. Securing from Fraud Claims
We hear about fraud insurance claims a number of times and it was a difficult asks for the companies to find out which were genuine and which wasn’t. But all thanks to the advanced Blockchain technology, it has been really a savior.
In fact, one of the major reasons why most of the insurance companies have already began putting money into this technology is to identify the fraud claims. Top US investigating agency Federal Bureau of Investigation (FBI) has stated its report that about five to ten percent of all insurance claims are false. As a result the insurance companies have to incur a loss of about $40 billion a year.
Now, how does the Blockchain help? Primarily it helps in maintaining a cross-industry registry of the policyholder. This actually is used in verifying the details of the person and also scrutinizing his files and documents. The Blockchain will check whether the person is holding any other past policy or not and if he is involved in any sort of illicit activity regarding claims previously. The distributed ledger of the Blockchain is nearly impossible to change and so it also provides authenticity.
In addition, you can also make use of the Blockverify, which helps in keeping a vigil on the goods and items such as medicines, automobile accessories, and luxury items etc. The company will be able to detect precisely whether the goods have been stolen or manhandled or even duplicated. The Blockchain will keep a record of each of the goods and so nobody can claim false insurance in case of any damage.
3. Enhancing the Trust Factor of the Users
When it comes to building the trust on the insurance companies, we do not get a very good picture on that front. One of the key reasons is because there is a lack of transparency element in that sector. For instance, only 17% people in California have enrolled for earthquake insurance although the region falls in high earthquake prone area and loss of lives are quite huge.
Moreover, the consumers often remain in dark as to what do the insurance companies do with their invested money. Yet again, it is the Blockchain that comes to the rescue and ensures a bolstering trust between the customers and the company.
We know that Blockchain is basically a shared or distributed ledger and so everything is transparent here. The policyholders are aware about how the company is dealing with their amount. So, once they get the knowledge, they would be comfortable and sure that their money has gone into the right channel.
4. Protecting the Leakage of Private Data
There is always a sense apprehension amongst the policyholders regarding whether their private and confidential data would remain secured with the insurance companies. Apart from that, if a person switches the insurance company, then it becomes a tough task to get the coverage and data transfer.
Blockchain is there to offer a robust security and drive efficiency that makes it possible for the person to control his own private data and verification is done on the Blockchain. Nowadays, there are companies that are offering KYC solutions through Blockchain. In this process, the data would be transferred to the concerned insurance company after the completion of KYC and you don’t have to re-enter the data once again.
5. Easing out Health and Reinsurance
Healthcare insurance is one of the most common types of insurance claim that most of the people enroll for. But the problem arises when they don’t get the health insurance in time because of which it becomes difficult to manage the heath expenses.
According to a research, about $262 billion of insurance has been denied in the US hospitals due to various reasons. However, you do not have to worry much as Blockchain has found a viable solution to the problem.
The Blockchain technology controls the patient data and allows them to access it step by step. It also keeps a separate database for the medical records and stores a cryptographic signature for every record.
Even the reinsurance has got benefited to the advantages of Blockchain. It often poses difficult situation for the policyholders specifically in cases of natural disasters. Since the data is shared through Blockchain, the customers get better opportunity to claim for insurance in real-time when all the conditions are met.
The Blockchain technology is the future driving tech tool, which will largely influence a number of industries. It has truly disrupted the insurance sector and now asking for the claims, detecting on fraud claims and other activities have become much simplified.
Although Blockchain is new in the era but it is presenting huge opportunities. It has proved to be a boon for both the policyholder as well as the insurance company. Therefore, insurance companies should not lack behind in adopting this technology to flourish in this competitive arena.