The initial application of blockchain technology was in the cryptocurrency sector-for sure. However, over the years, it has expanded into several other sectors-slowly but steadily. Not only the banking giants and major NBFCs are experimenting with cryptocurrency and blockchain tech, but a number of iconic investors have become its proponent. The number of celebs endorsing blockchain tech are not insignificant either. Experts predict in the near future, blockchain will be deployed in the insurance sector and the industry can benefit greatly from well planned deployment of this emerging technology.
Why and how blockchain tech deployment can benefit the insurance sector
Insurance is a huge industry and it is divided into many sub wings including life, home, vehicle, accident and so on. There are some typical problems that are faced by the players in the insurance industry and these include:
- Compliance related factors
- Handling and processing massive amount of data with accuracy
- Coping with fraudulent claims
- third party payment issues
- efficiency in information exchange between various parties
These problems have haunted the insurance sector for ages- as it is. With technological evolution, these are now being handled better than the past. However, blockchain deployment can make things a lot better for this industry-say the analysts.
Analyzing the blockchain insurance use cases and application areas
As of now, blockchain is still evolving and numerous entities are experimenting with it to understand and explore the potential. The same is true about the insurance sector giants and analysts. There are some early adopters for sure. As of now, some major application areas of blockchain tech in insurance have been highlighted and with time, more will come to the forefront. The IBM blockchain deserves a special mention here and its deployment has already shown how the tech can expedite claim settlement and bring benefits to all parties involved.
Fraud Detection and Risk mitigation
It goes without saying that frauds have been a much hated part of the insurance sector since the early days. This is a menace that both the end users and insurance companies would love to get rid of. While the insurance companies have been using technologies to evade frauds, achieving 100% success in fraud prevention is easier said than done. On an average, the insurance sector loses approximately $80 billion every year owing to frauds. The standard fraud prevention measures are not exactly fail proof and the malicious lot learns new ways to bypass the measures. Every year, new types of frauds crop up in this sector.
Blockchain is transparent as far as operation is concerned and so it can be helpful in resolving frauds affecting the insurance sector-say the experts. The secure distributed ledger ensures validity of transactions made. Data once written using it can’t be altered by outsiders. This brings down scope of frauds to a large extent. In this method, the claims are kept on a distributed ledger and so the insurers can verify the data easily and remain assured.
The following frauds can be handled by using blockchain tech:
- Stopping/reducing counterfeit claims
- eliminating double booking/sending on same mishap/accident
- Removing the unregistered agents/sellers
- Claims Prevention and Management
Apart from fraud, insurance sector also suffers from the menace of Claims Prevention and Management woes. The insurance companies need time to obtain required details and settle claims. Verification of the documents also takes up time. Checking authenticity in such cases can be both complex and time consuming.
Blockchain, laden with the new technologies can be used to aid insurers develop a capable but transparent customer-focused claims framework. Blockchain’s distributed nature ensures hassle free and trustworthy implementation method in claim verification. Obtaining and verifying claim related data becomes simpler. This will eventually streamline and speed up claim settlement. Eventually, this enhances customer satisfaction ratio.
Blockchain, in sync with latest technologies like advanced biometric sensors, satellite, Mobile network and others can be used to resolve trust issues involved in insurance claim settlement. Blockchain serves as the backbone in such setups. It can also be used to make payments related to claims.
Property, auto as well as Casualty Insurance settlement
Casualty and property insurance is used by a lot of users-across the world. Handling and resolving such insurance claims is often complex. The sector is plagued with hassles like lengthy and complex paperwork, manual data entry, coordination across various parties etc. The scope of human errors exists despite deployment of computers and cloud based services.
Using blockchain can resolve the issues that arise out of lack of robust claim settlement framework in these sectors. The physical assets can be managed digitally in the future. So, the business norms can be executed and implemented automatically. Smart contracts can be used for claims handling and settlement and claims can always be traced for genuineness.
Auto insurance sector can also benefit by deploying blockchain tech in alliance with advanced vehicular safety tech. The vehicle safety system nowadays is sensor driven and crashes can be reported without human intervention using blockchain tech and such safety systems. In such an event, a smart contract can be used to assess vehicle damage and claim settlement process will be triggered.
Addressing health insurance woes
In healthcare sector, sharing of patent data is dicey. Not all entities including hospitals and health insurance companies are always willing to share patient data details. There can be data sharing issues affecting various insurance companies serving the same patients. This is often owing to their confidentiality clauses. However, this can cause delay in settling health insurance claims and makes things tough for all parties involved. Health insurance sector suffers from 2 glaring issues- Rigid privacy laws thwarting free information sharing and outdated backend infrastructure.
This can be improved by using Blockchain. This is a robust cryptographically secure network which can benefit the healthcare infrastructure. The patients can then be in control of data and they can choose with whom they want to share it. Since blockchain deploys a cryptographic signature, its use ensures registered data just can’t be altered. Besides, the data stored on the blockchain is upgradable. The audit information will be executed minus woes.
Reinsurance comprises of a large chunk of the insurance industry. It covers the insurers from mishaps like natural disasters much in the way insurers covers the customers. In times of mass health epidemic and vast natural calamities, the reinsurance cover can help the insurers address claims.
The existing method used by reinsurance is not adequate. Manual processing is still there and one off contracts can be limiting. It can be hard when the need arises for coverage for the insurer.
Reinsurance also suffers a lot from inadequate information flow between the parties. Blockchain technology can be the savior here. It offers a streamlined network which is great for information exchange and shared ledger resolves a lot of hassles. This speeds up claim process considerably. The operational cost can be reduced too.
Addressing life Insurance issues
Billions of people opt for life Insurance and the reason is not hard to understand. Yet this sector is known for woes like claim settlement delays and complexities involved. Death registration is not always smooth and so verification can take longer than expected. This delays claim settlement – as a result.
By using blockchain tech, things can be improved a lot. A robust blockchain based life insurance model can be used to work in alliance with insurance firm, hospitals, burial or cremation entities for faster claim processing.
Summing it up
Blockchain is an evolving technology and its adoption rate is still not fast, even in the Insurance sector. Some MNCs and large insurance entities have adopted it but it will take more time for others to follow. The insurance companies also need to reach a consensus about integrating blockchain with existing framework. Several legal, tax related regulations have to be modified for this and govt intervention will also be necessary. Large scale IoT deployment will also be required for Blockchain to work seamlessly in insurance sector. So, it will take quite some time before this technology can be deployed in an intrinsic manner in the insurance industry.