The Benefits of Using Blockchain in the Insurance Industry

Insurance policies are not about just twenty or fifty years. The insurance industry has been here for centuries, even for thousands of years. Thousand years back, Chinese merchants and seafarers used to share their wares into collective funds to help them pay for any individual shipwreck.

For centuries, there have been noticeable changes in insurance policies all over the world. The advanced technologies have permanently changed entire industries over the past decade, in many ways, the multi-trillion-dollar global insurance industry is still stuck in the past with little innovation made in the customer experience.

Despite the rise of online brokers, many consumers still purchase new policies through insurance brokers over the phone. These paper contracts are often error-prone and require human supervision.

Compounding this issue is the inherent complexity of insurance, which involves consumers, brokers, insurers, and reinsurers, as well as insurance’s main product — risk.

Each step in this collaborative process represents a potential point of failure in the overall system, where information can be lost, policies misinterpreted, and settlement times lengthened.

Blockchain Insurance fits perfectly to fill in the gap between the communication and relationship between the policyholder and policy providing company.

With the world shifting towards Web 3.0, it is quite evident that Web3 in finance will open enormous business possibilities for the finance industry. Switching to blockchain development services will push insurance companies toward the web 3 revolution.

Earlier, people used to consider blockchain as the wave of extreme hype around the crypto world. And blockchain's true applications lie within the cryptocurrency space.

But now, with the rising popularity of Blockchain Insurance, it is clear that blockchain acts like a transformative force even in the industry like insurance.

Blockchain Insurance in Brief

Blockchain is a revolutionary technology that lets anyone who has an internet connection be able to send and receive value worldwide, instantly and with no fees.

Blockchain is like a public ledger that records transactions between two parties efficiently and in a verifiable and permanent way. This technology is at the heart of Bitcoin and other cryptocurrencies such as Ethereum.

Blockchain trends and technology can be used for various purposes. For Blockchain Insurance use cases, we can use blockchain technology to let people know what happens to their money when in case of a claim. 

This can be done by distributing the data of the claims over a network of blockchains. Blockchain technology and smart contracts are used to verify the claim, process, and transfer the money. 

The customer can also track the progress of their claim.  Blockchain technology can reduce time and cost at the same time it can be used for fraud detection. This will be useful for claims arising out of cyber insurance and vetting claims for fraudulent activities.

Blockchain Insurance ensures storing of insurance companies' and policy holders' data and information with high security. The blockchain is secure because it can only be opened by the private key. For data that needs to be secure and encrypted, private keys are generated by the user.

This makes the information and data stored on the blockchain extremely secure. The information or data stored on the blockchain is transparent as all data can be seen by anyone using the blockchain.

This means that there is no manipulation of data. So, whether it is the blockchain for cybersecurity maintenance or storing insurance data, the technology is beyond any comparison.

Blockchain Insurance: The Prime Use Cases

Following are some of the most advantageous use cases of Blockchain Insurance that the insurance industry can experience:

1. Registration of High-value Items and Warranties

Blockchain is immutable and trustworthy. It will improve the organization's workability. It can track product ownership and claims in real time and even across borders. It can enhance industry-wide efforts to migrate claims and fraud through superior data and data sharing.

2. Learn about Customer KYC and Anti-Money Laundering Processes

A tamper-proof repository can help establish customer information sharing between organizations, reduce risks of error, solve data duplication problems, increase customer visibility, and save time and resources.

3. Insurance Distribution

Blockchain technology has the potential to change the insurance industry by making transactions cheaper and easier. It can also allow policyholders to manage their policies on one platform.

4. Effect on Reinsurance

Blockchain Insurance can help improve data sharing between insurers, brokers, and regulators. By automating risk modeling, audit, and compliance checking, it can bind towers of risk and treats on single-timestamped smart contracts, making the process more efficient and accurate.

5. Maintaining Peer-to-Peer Insurance

Automating tasks and holding funds in escrow on smart contracts, will enhance existing peer-to-peer models.

6. Parametric Insurance

Automation is becoming increasingly commonplace in business as companies strive to fully streamline their process. This can have a huge impact on many different sectors, from insurance to flight delays and cancellations.

However, some experts believe that the complete automation of processes may not be entirely possible, or even desirable.

7. Streamlining Property and Casualty Insurance

Property and casualty insurance is a huge industry that helps to protect people's homes, cars, and businesses from unforeseen events. The problem with this industry is that it has traditionally been very manual and therefore prone to human error.

However, by using shared ledgers and smart contracts, the industry can solve these problems and make the process of issuing new policies or claiming existing ones much faster, more efficient, and more cost-effective.

So, blockchain trends can certainly impact property and casualty insurance as well.

8. Effortless Fraud Detection

Each year, the cost of insurance fraud goes up. The current process for fraud prevention is outdated and often results in errors and potential fraud. To fight this problem, insurance companies could store claims and ledgers.

Blockchain Insurance can help them communicate and understand suspicious behavior.

Wrapping up

So, from safe data storage to cost saving, Blockchain Insurance can benefit the insurance industry in many ways. The technology is in a nascent shape; it is true. But, the insurance industry can not overlook the possibilities blockchain consulting can bring to the sector.