Blockchain in insurance industry. Is it possible to make it better?
The insurance industry, despite paying huge premiums, experience big problems with high financial losses. Poor data quality, low efficiency of business processes and multitude of scams are one of the biggest difficulties. Access to blockchain technology will help to eliminate some of problems and slightly modernize the industry. How? Through decentralization, transparency and increase of security, reducing transaction costs and time of its duration.
Blockchain solutions used in the insurance industry
Minimizing the number of intermediaries will not only speed up business processes but also increase confidence in the industry. Smart contracts affect on workflow automation, reduce risk of fraud or minimize amount of low-value data. Moreover, diversity of insurance services and their availability may increase. Here are some blockchain solutions used in the insurance industry.
Medical treatment and claims – blockchain in insurance industry
Health insurance branch is a great example of inefficiencies and errors in patient claims. About 10% of complaints are rejected and many appeals against that decisions appeared. They require an answer, which generates further costs. Firstly, blockchain in insurance industry makes it possible to create one version of a document with complaints, serviced automatically. Secondly, it can improve the management of relations with service providers, its speed and flexibility.
Cheat prevention – blockchain in insurance industry
Blockchain’s technology main task is to prevent abuse and fraud, which causes loss of money by lots of people which is caused by increasing insurance premiums. Introduction of a centralized document storage location will allow detecting inconsistencies, frauds and criminals using algorithms.
Fast identification of customers
Insurers, banks and brokers have to meet the requirements specified as Know Your Client. It is an identification procedure that allows collecting all necessary personal data of the client. If the customer behaves inappropriately – there is possibility to create suspicious activity report. Furthermore, blockchain technology can also appear in KYC to save documents in the distribution register and to encrypt them using keys. The customer has an access to documents until they are verified. Thanks to this, it will be able to control the data. Blockchain will also reduce the cost and time of KYC controls.
Microinsurance program – blockchain in insurance industry
People with the lowest income get help from the Microinsurance program. It protects them against certain risks and involves payment of insurance premiums. Its main downside is the fact that it does not always reach people who need it the most. Massive amount of people who could potentially benefit from this program live in India, Latin America and Africa. On the other hand, insurance providers occur in East Asia, North America and Europe. Blockchain technology would help to connect suppliers with customers using direct insurance transactions. In addition it would facilitate cooperation, shorten its time and minimize the bureaucracy.
Peer-to-peer insurance consists of raising funds by the community in order to create a mutual assistance fund. This system does not pass the exam – it is a bit risky and complicated. Blockchain technology in insurance will enable the creation of a platform that will automate and standardize p2p insurance. An intelligent contract will allow to create deposit and to pay funds. It will help to reduce number of phishing scams.
If you want to know something more about blockchain and cryptocurrency in agriculture – check out Advantages of blockchain in agriculture or another of our articles.