Bryant Nielson | April 17, 2023
Insurance companies are working in a highly competitive environment where both retail and corporate clients want the best value for their money and an unmatched online experience. Blockchain technology brings an opportunity for positive change and disruption in the global insurance industry. In the Accenture Technology Vision 2019 survey, over 80 percent of the respondents (insurance executives) reported their organization’s measures to adopt the blockchain across one or more corporate units besides planning for different pilot studies. The survey also predicted that the global blockchain market in insurance would reach $1.39 billion by 2023, with a massive CAGR of 85 percent! Indeed, the potential of blockchain technology to disrupt insurance and change the way data is shared, claims are processed, and frauds are prevented, is thrilling but the insurance industry is still in the early stage of its exploration and implementation. This article highlights how will blockchain impact the insurance industry, thereby motivating insurance firms to join the race as soon as possible.
Why Blockchain in Insurance?
The core advantage of blockchain is that it develops trust between parties that are sharing information. All information is encrypted as a block or an electronic list of records. It cannot be erased, which ensures trust between users. Once information is recorded, no one can change it without changing all the records, which leads to secure transactions between the users. This is going to be very valuable to the life insurance industry since it helps to make sure that information is accurate, trusted, and secure.
Experts predict many areas where blockchain would prove to be a disrupting force in the insurance industry. As blockchain technology is almost as mature today as the World Wide Web was in 1996, these are certain suppositions at this point; though, it’s very clear that blockchain implementation will lead to massive changes and will have a noteworthy impact. Here are the most anticipated impacts blockchain would have on the insurance industry.
The Ways Blockchain Will Impact the Insurance Industry
- Improve Trust
There’s a huge trust crisis in the financial services industry. Even though mainstream banks are the focal point, the loss of trust affects all businesses. Lack of trust, excessive costs, and inefficiency of the insurance industry lead to high degrees of underinsurance. For instance, only 17% of households in California have taken earthquake insurance even though the possibility of experiencing severe losses from an earthquake is quite high. Blockchain enables the trust-building of consumers since it offers transparency.
- Enhance efficiencies
If you have changed your insurance company or healthcare provider before, you must know inefficient the data-entry process is to get your coverage started. Moreover, the customers are afraid of losing their control over their own personal data. Blockchain gives a solution to drive efficiency and safety that would put the data controller in the hands of an individual while verification is registered on the blockchain.
- Seamless Data Management
With blockchain, the cryptographically secured saving and sharing of medical records can be possible between health providers, which ensures interoperability and a higher degree of security in the dynamics of health insurance. Patient medical records are stored safely, and patients get control of their medical data. This presents an opportunity for the insurance industry to cut costs and gain a higher patient satisfaction level.
- Effective Claim Processing Via Smart Contracts
The insured and the insurer each are faced with problems that blockchain and smart contracts could solve. Insured individuals usually find insurance contracts long and confusing while the insurance providers are battling a huge risk of fraud. Through blockchain and smart contracts, both parties can manage claims transparently and responsively. It would begin by recording and verifying the contracts on the blockchain. When a claim is submitted, the blockchain ensures that only valid claims get paid. The network will automatically detect multiple claims submitted for the same accident. Upon certain criteria being met, the blockchain could generate a payment of the claim without any human interference, thus improving the speed of claim resolution.
- Avoid Fraud
FBI revealed that on average, over $40 billion is lost annually in the U.S. due to insurance fraud. Thanks to the outdated procedures and manual intervention in the insurance industry make it highly vulnerable to potential insurance fraud and risks. Through blockchain, by saving the claim information on a decentralized ledger, insurance firms can safely detect malicious activity or behavior and avoid potential fraud risks.
Considering the Blockchain Limitations
Like any technology, blockchain does possess certain limitations and challenges it is not fully secured against the cyber-attacks that might lead to data integrity loss, the excessive cost of adoption, and privacy concerns arising out of the notion that blockchain is publicly available.
The Future Words
Despite the limitations, the massive potential of blockchain technology to positively disrupt the insurance industry cannot be neglected. Today, the insurance company must figure out how blockchain technology can improve the way they do business today and in the future. Standards and processes should be aligned for blockchain to offer insurers better tools for sharing data, collaborating, communicating, and making insurance a hassle-free process for both the insurance firms and the customers.