Blockchain in insurance, like blockchain technology itself, is in its infancy, but on the peak of rapid expansion. Insurance companies that see the potential and are proactive in its adoption will likely be the frontrunners in innovation and ahead of the curve when the benefits are fully realized.
There is an opportunity for efficiencies in transparency and cost-cutting, and a few high-profile applications are taking hold. When the regulatory landscape evolves with the technology, more insurance companies will likely follow.
One of the great benefits of blockchain is that transactions are recorded in multiple ledgers at the same time and it’s immutable. This means that once recorded the transactions are virtually impossible to change. So transactions over the internet have little to no risk of being hacked or interrupted. So for many transactions the safety is greatly increased because of the method of storage. -ShawnMcBride-
The use of blockchain in insurance
1. Fraud detection and privacy will likely be the biggest trend/benefit. By tracking claims onto a blockchain, it can eliminate many of the common areas of fraud and allow companies to detect trends in claims. Furthermore, medical records would benefit significantly from a blockchain, where the provider can share secured files much easier.
2. Allianz has a well-publicized blockchain technology that executes swaps through smart contracts involving catastrophic insurance. Several other companies are looking into medical records and systems to provide cryptography and timestamps for efficiency and cost savings.
3. The biggest challenge to blockchain adoption is that the regulatory treatment is unclear for many uses with blockchain and virtual currency technology. It seems as if every federal regulatory agency has chimed in on cyber issues, but none have taken the lead. Until the regulatory structure is clear, many companies will be hesitant to use the technology to innovate their business processes.
4. Fraud detection & risk prevention. With blockchain, companies can avoid common sources of fraud by moving insurance claims onto an immutable ledger.
Property & casualty insurance.
Blockchain smart contracts can turn paper-based contracts into programmable code that helps automate claims processing and calculates liabilities in insurance for all players involved.
Blockchain provides more efficient data sharing and stronger safeguards against fraud. Blockchain offers new opportunities to streamline payments and attract financing risk. In P&C insurance audit trails become more comfortable to follow, modeling requirements are highly reduced.
What are the benefits?
Blockchain has the potential to eliminate errors and detect fraudulent activity in the insurance ecosystem. Blockchain establishes an efficient, transparent and customer-focused claims model based on higher degrees of trust.
Blockchain is going to be a way for insurance companies to reduce costs massively. We have spoken with a number of insurance companies that are beta testing blockchain solutions to verify insurance claims. This cuts out a huge administrative cost for insurance companies.
As insurance is essentially a pool of money, collected via premiums, the insurance process or “humanchain” can be awfully complex. Consider just the insurance buying process: Insured persons e.g. you and me
Agencies retail insurance — sales agents, account managers, etc. Brokerages/direct insurance companies wholesale insurance — lawyers, underwriters/brokers, claims department, etc. Insurance companies claims adjusters, actuaries, underwriters, etc.
Much of this process, with so many hands, can be automated via the blockchain. Also, the beauty of blockchain is that it enables new types of insurance organizations, such as peer-to-peer co-ops. The smart contracts allows strangers to build trust without centralized insurance companies. (A notable, pre-blockchain era example is Lemonade <https://www.lemonade.com/>.) Driven by a greater number of individuals and organizations, blockchains will be better equipped to enable this type of economic progress.
For smart contract-based insurance, the chief technical challenge is how to bring off-chain events, such as accidents, major diagnoses, death, etc. into the contract. This is the Oracle problem, but fortunately we have a solution. With blockchain smart contracts, reinsurance contracts can be secure and protected simplifying the flow of payments transactions between reinsurers and insurers.
With the blockchain, insurers providers can share policy records that are cryptographically secured between each other increasing interoperability in the insurance ecosystem.
The following country has so far implemented Blockchain in insurance:
Giant insurance players like Allianz and Swiss Re are implementing solutions.- Alexandra Z.-
Final thoughts: Blockchain has vast potential. Insurance companies looking to innovate and are proactive in its uses will likely reap benefits in ways we can imagine, and in likely unimagined areas. As the regulatory framework progresses with innovation, companies will benefit. But that regulatory framework will likely lag the innovation, and frustrate those willing to adopt new technology. – Braden Perry–
JOIN OUR COMMUNITY