Blockchain — Digitizing The Insurance Industry

A better way to pay for insurance.

Ownership of assets carries the responsibility of securing the value of those assets into the future. The insurance industry plays a big part in our lives and in some cases, we are mandated by law to own insurance. As the blockchain is improving numerous other businesses it is also set to impact the insurance industry. Blockchain technology promises to deliver some of the biggest improvements the industry has ever seen.

Compared to many other industries the insurance sector appears antiquated. Paper contracts and insurance policies issued over the phone stand in stark contrast to the purely digital nature of many other industries. Analog processes create the risk of lost data, fraud and misinterpretations but the reliability of the blockchain is set to reduce those risks.

The blockchain offers an immutable record of transactions which the insurance industry is looking to harness. Accountability and transparency are delivered by blockchain technology and promise to streamline the nature of insurance processes. However, there are legal and regulatory hurdles to overcome. Maintaining customer privacy and adhering to data protection regulations will need to be ensured as the insurance industry pivots into the blockchain.

Blockchain technology offers many improvements in the way insurance policies can be issued and honoured. It will improve efficiency by streamlining the process of data entry to deliver greater speed and accuracy. As the data on the blockchain is cryptographically secured it helps improve trust amongst network participants. Furthermore, the implementation of smart contracts has enormous value for both insurers and policyholders as smart contracts can be programmed to take action when certain conditions are met. These opportunities will improve the speed of service and should significantly reduce the cost of insurance policies.

A major portion of the insurance industry delivers health insurance yet there are many inefficiencies in the current system. Mistakes on medical records and the manual process of verifying information in insurance claims cause delays and unnecessary costs. The blockchain offers the ability to easily share cryptographically secured information across numerous providers and networks. Improving the speed and accuracy of information transfer while maintaining data security will reduce prices and improve customer satisfaction.

The insurance of vehicles, commercial and home properties is a multibillion-dollar business. This data-heavy process consists of many layers and blockchain technology will reduce reliance on the manual entry and checking of important information. In this way, human error can be mitigated to ensure greater accuracy. A decentralized ledger of insurance information on the blockchain is estimated to make processing insurance claims up to three times faster and five times cheaper.

Fraud is one of the biggest issues associated with the industry and insurance fraud in the US is estimated to cost more than $40 billion a year. With so much money involved, there are significant opportunities to reduce fraudulent information through blockchain implementation. As the networks grow, information analysis can be used to assist in identifying patterns of suspicious or fraudulent behaviour. Over time this should discourage fraud as the opportunities to inject fraudulent information into the network decrease.

It is clear that the blockchain has many benefits to offer the antiquated insurance industry. The efficiency of blockchain networks are able to improve the speed and accuracy of information and this should deliver savings which can be passed on to the consumer. Perhaps the biggest opportunities for the insurance industry may be to open the business of insurance to a wider number of investors.

The traditional insurance industry has been controlled by a few large players who monopolized the market. Blockchain technology’s benefits extend beyond pure business efficiencies. The technology has qualities which could allow fractional ownership of the insurers of the future. Wider ownership of insurance providers could open the door to greater transparency that would ensure the cost of insurance was priced fairly. Some people feel that parts of the insurance industry operate predatory pricing schemes, for instance in funeral insurance. Blockchain technology has the capacity to ensure that we are not overcharged for insurance in the future.