Blockchain: A new disruptor in the insurance space?
ASPL India | Published Oct 21, 2021
Blockchain is one of the most exciting technologies around today. Thanks to its distinctive capabilities and potential for unlocking value, blockchain has taken several industries by storm. The insurance industry is among them.
Nonetheless, being a nascent technology, not everyone is familiar with what blockchain is and how it works. For starters, blockchain is an immutable and distributed digital ledger system for recording information. What makes it unique is once a bit of information is recorded in a blockchain, it cannot be erased or tampered with — thereby improving security and trust among users. Therefore, in an industry like insurance, where trust and security are vital, blockchain can provide multiple benefits to companies.
Let's now take a look at some potential use-cases for blockchain in insurance.
1. Preventing fraud: As we know, fraudulent claims are perhaps the biggest challenge insurers face worldwide. By moving insurance claims to a cross-industry, immutable ledger, blockchain has the potential to help insurers create more streamlined and effective solutions for fraud prevention.
2. Improving customer experience: Building trust and enhancing the transparency of processes and policies are crucial to delivering better customer experiences in the insurance industry. Blockchain technology will help customers gain more control and confidentiality over their data which, in turn, builds trust. Further, blockchain can also improve the security of records, which can lead to fewer disputes and a hassle-free experience for customers.
3. Faster claims management: Processing a claim is a complex, intensive, and multi-party task. It requires insurers, regulators, and third parties to arrive at a consensus across multiple data points. Since each of these entities might have their own data processing standards, needless redundancies could arise. A distributed ledger system would enable all the parties involved to digitally access and update data to manage claims more efficiently.
4. Streamlining reinsurance: Reinsurance refers to insurance purchased by insurers to mitigate risks arising from major claims events. Blockchain's shared ledger system could help simplify this notoriously complex process by streamlining the flow of information between insurers and reinsurers. A shared ledger would also eliminate the need to reconcile books between these institutions, thus speeding up the process.
As is evident, blockchain has much to offer the insurance industry. With the right legal and regulatory frameworks in place, blockchain can be leveraged to create a more efficient and transparent insurance ecosystem. Alongside blockchain, Artificial Intelligence (AI) and Machine Learning (ML) could also play key roles in the future of insurance. We'll take a closer look at them in the next blog.
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