How blockchain is used for the Insurance Industry

Introduction

As the world progresses, newer technologies are being introduced to catch up to the demands of the people. In the last couple of years, after the Internet made its importance known, blockchain technology has been the next technology that has been mostly talked about. And why not? This technology is disruptive in its nature with secure, open means of conducting business transactions by people. This not only creates a level of transparency or security but also puts an element of trust that was not previously possible.

The three fundamentals that makes blockchain the most talked about technology are:

• trust
• transparency
• immutability

It is because of having these abilities, does this technology becomes able to maintain records of comprehensive asset, contract and data ownership without the need to have a physical possession of them. Simply put, it negates the involvement of a third party. If there is a scroll through of the insurance services industry, the usage of the blockchain technology would mean that the outcomes are more certain as there is almost no room for contract interpretation or hiding of any crucial information.

Read More: How Blockchain is used in Education

How can blockchain benefit the insurance industry

The most important benefit of blockchain is that it helps in building trust between parties sharing information. As these informations are shared via encrypted records or blocks; they cannot be erased or changed without making a change to all the records. This ensures trust between users and if also the reason how it makes it possible for secure transactions between users.

To make it simpler, let us look into some of the ways blockchain can be implemented in insurance.

How is blockchain technology being implemented in insurance?

• Smart Contracts: They basically help sin transferring of Information without a third party involvement. Thus, this can be an useful way to write insurance policies. It can use coded language for file transfers. The use of decentralized smart contracts will also help an individual and a insurer in their agreement; where the person agrees to pay the insurance company money in return for the company’s promise to cover that person’s future medical costs. The blockchain smart contracts will be able to create a data based on an insurance policy owner’s records which can immediately accept or decline any insurance claims made to the company.
• Automation: The insurance sector has a lot of files and forms to be taken care of in order for the varied informations to be present when needed. With millions of insurers, healthcare providers and patients to take care of it is easy for the industry to get bogged down by time-wasting inefficiency. This can lead to human error and poor communication between the parties involved. The usage of a digital ledger like blockchain, it can automate the outdated processes and save billions of hours of paperwork; as all forms and data are safely stored along the chain.
• Security: The sense of security that blockchain brings with it is maybe the most enticing option it brings to the table. Especially in an industry that largely relies on data that comes from being at the intersection of health, work and personal life. With blockchain, though the data is encrypted, it is also absolutely transparent; while the nodes can see the actions of an individual, their true identity remains hidden.

Top 6 use cases of Blockchain in the insurance industry

Use Cases	Implementation
Interoperable and comprehensive health records	The ability to add security and to establish trust between the parties are two of the reasons why this technology can help solve the interoperability problem far better than any existing technologies of today.
Administrative and strategic imperatives	Blockchain technology has the ability to automatically collect records of agreements, transactions, and other valuable information, to then link them together and act on the data by using smart contracts.
Detecting fraud effectively	If fraudulent information is ever submitted to a life or health insurer via false claims or falsified applications, the smart contracts will be able to help determine the nature of the submission; whether or not it is indeed valid.
Improving accuracy for provider directory	Unique provider directories can take advantage of the technology’s decentralized consensus protocols. They can allow providers and insurers to update the listings quicker and in a much easier way.
Client-centric application process	Blockchain can be used in insurance to provide an easier-to-access and a comprehensive set of medical records. Being decentralised, they can infuse comfort and peace of mind for the often discouraging application process.
Dynamic insurer/client relationship	Electronic health records on a smart contract helps in securely keeping the information of a wide variety of wellness-related behaviours into the insurer/client dynamic.

Limitations of using blockchain in insurance industry

Though the technology possesses a lot of potential for a better managed insurance policy for both the client and the insurer, the lack of familiarity of the technology in the insurance industry brings a few limitations as well.

• The complexities of blockchain: The technology , though revolutionary, is still being understood by the mass. They have to be technologically sound to be able to confidently make use of the same.
• Scalability: Due to the consensus-based validation mechanisms and the continuous replications of the blockchain technology, as well as its ever-growing amount of stored data, the scalability of a blockchain system can become a challenge.
• Security: With incidents like the FTX collapse, the blockchain sector is yet to gather the defences against the security attacks that may come from various entities.

Additional Read: How Blockchain is used in Healthcare

Top Blockchain Insurance Examples

Final Thoughts

The insurance industry must establish a structure and incentives which will ensure a fair and positive outcomes for all stakeholders; if they are seeking to lead a new consortium or to build a network with their peers. The governance structures and technology stacks should be designed keeping in mind the long term effectiveness. Institutions that are exploring the blockchian space for insurance should build the technology that can help in scaling well and efficiently bring together small and large businesses behind a common set of interests.

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