Blockchain Applications In Insurance
Are blockchain insurance solutions so wonderful that we need to execute it right away? What impact does blockchain have on this mega, ever-growing industry?
Why does such a big industry like the insurance domain need the help of blockchain while it is capable of functioning all by itself?
Here is why! This trillion-dollar-worth industry is preyed upon by numerous predators. Likely false insurance claimers, middlemen who take bribes, and most importantly improper communication amongst subdomains.
While this is the case within the industry, there are a few other complications that need to be addressed. Imperfections such as unreliability, lack of transparency, false records, delay in the process are a major threat not just to the companies, but for the customers as well.
Hence, blockchain applications in insurance are in high demand. Besides this, there are proven blockchain insurance use cases that are turning heads in the industry.
Blockchain technology isn\’t just a more efficient way to settle securities. It will fundamentally change market structures, and maybe even the architecture of the Internet itself. Abigail Johnson, Chief Executive Officer of Fidelity Investments
What are insurable?
We’d say anything. Literally anything. The best example, the legendary Grammy award winner, Bruce Springsteen’s voice is insured for around $6 million reports a leading news portal. Even if that’s something very regular for the big shots, there are other things that people like you and me do.
We insure our cars, motorbikes, pets, house, our lives, and whatnot? While the list of things that are insurable goes on, so does the record of false claimers.
Let alone the fraudsters, the very thought of not receiving claims for what we rightfully deserve could rec havoc in a lot of people’s lives.
The FBI reports that the total cost of insurance fraud in the US is $40 billion a year.
Now tell me, do you still think the insurance business doesn’t need Blockchain’s help?
A quick view of the possible blockchain insurance solutions
Identifying fraud claims
Day by day it becomes more evident that the insurance companies are not well equipped to figure out poor claims. Be it legal matters, technological flaws or competitive concerns, the insurance industry needs to increase the observation space to hunt down the drawbacks.
In most of the western countries, false insurance claims are punishable. Yet insurers are constantly robbed by wrong claimers. The vital reason for this possibility is the lack of shared information across the industry.
On average the US family has to spend anywhere between $400 to $700 in the pretext of increased premiums owing to the increase in false claimers. This not only affects the insurance companies, but it also puts a burden on the other customers.
If only there was industry-wide storage, to keep track of all the details, it would be much more feasible to detect repeated claims and other wrong activities. Besides this, the right people paying out of their noses would be cut down drastically.
Fraud detection would no longer be a strenuous task if blockchain is implemented in day-to-day life. Besides simplifying the processes it would also save millions for the industry every day. Here comes the role of blockchain in insurance industry.
How does blockchain benefit the industry in fraud detection?
- Improved coordination between the customers and the industry.
- Record the transactions on a permanent basis with specific access control.
- Record all claims information into a distributed decentralized ledger to avoid double claim.
- Prove identity with digital certificates and avoid wrong claims.
The benefits don’t really end here. There are a million to keep note of. However, I’ve mentioned very few to give a glimpse.
Now, on to how things work when it comes to claiming insurance for property damage and casualties.
Blockchain Insurance claims for property damage and casualties
Of all the insurance claims in the U.S. 48% account for Property and Casualty premiums, which sums up to $576 billion.
Now the other big challenge the industry faces is, ‘collecting necessary data to evaluate and approve the claims.’ This sure is subjective to every case. What is legal and noteworthy in an accident case for one company, could be a trivial matter for the other.
In such a case, how do we come to the right terms? Let’s see such a scenario here.
If you’ve met with an accident where the other person was at fault, you would approach your insurance company with the documents for fund claim. Now, your company would approach the other person’s concern to confirm with the status that you gave.
That company might have a completely different set of rules and regulations to deliver funds.
Achieving a middle ground when having to deal with multiple companies could be tough.
Using smart contracts, that would automatically trigger payments and insurance claims depending on various scenarios would be of great help. Accident claims demand vital proofs and the party to be present physically. This could be managed to an extent. However, it would be much more beneficial when it comes to claims for flight delays.
“The blockchain does one thing: It replaces third-party trust with mathematical proof that something happened.”Adam Draper
- Executing smart contracts using blockchain could digitize all the paperwork and make permanent records.
- Using programmable codes instead of paper documents would have better proofs and save time.
- The smart contract could automatically trigger a request for manual verification of the loss.
- According to CBInsights, smart contracts would save a minimum of $200 billion a year in terms of operating costs.
- It would drastically speed up the payouts and reduce human intervention.
- Going a step further, special blockchain-based sensors (attached to the vehicle) could automatically intimate the insurance companies when an accident occurs.
Final Thoughts
Why should managing insurance services be such a tedious task? Are we not supposed to do it seamlessly? Why break your head off when you can create a million new ways to build a billion solutions? Sound interesting?
Developing a blockchain solution for your insurance company is just as easy as it sounds. All you need to do is get blockchain consulting services from the best blockchain development firm. Our doors are open round the clock for you to walk-in anytime.
Before we bid bye to catch up in the next blog, here are the key takeaways that you might have to read if you’ve felt the blog was too long to read.
Key Takeaways
- Blockchain insurance solutions create transparent communication between insurance providers and buyers.
- Blockchain insurance use cases include proving identity or declining false identity with blockchain verified digital certificates.
- Seamlessly digitize documents for insurance approval so the process is simplified.
- Blockchain applications in insurance could record all claims information into a distributed decentralized ledger to avoid double claims.
- On speaking about Blockchain for commercial insurance, smart contracts would save a minimum of $200 billion a year. This is only in terms of operating costs states a leading news portal.
- As always the benefits don’t end here. There are at least a million. But it all lies in how well we implement them.