Blockchain Enchances the Insurance Industry
Image Credit - Dev Team
As an emerging technology seeking mainstream acceptance, blockchain continues to build applications and use cases towards solutions that can have an immediate impact on industries in need of innovation, efficiency, and/or disruption. One industry that easily fits these criteria is insurance.
Historically, the insurance business started out within the shipping industry by helping merchants in China spread the risk of losing cargo leveraging multiple ships; fast forward to London in the late 1600s, Lloyd's Coffee House served as a hub for multiple parties on voyages looking to mitigate risk on a variety of trading expeditions. The ability of these risky ventures to be insured allowed for continued commercial growth and exploration over the next 100 years.
Current models and processes within today's insurance companies rely on outdated systems and databases that are ineffective in connecting with one another, despite having to access the same sets of data. Lack of communication and connectivity increase transaction timelines from days to weeks, which directly impact clients that are waiting to receive benefits from insurance plans.
What can blockchain do for the insurance industry now? Here are three core benefits:
> Establish trust -- since the financial crisis of 2008, trust in financial services institutions has been at historic lows. Blockchain removes biased intermediaries and creates trust through its distributed ledger technology (DLT), encryption, and immutable transactions that require majority consensus before being posted as blocks chained chronologically.
> Increased transparency and efficiency -- Despite recorded entries on the blockchain being virtually unchangeable, all the blocks (and necessary data) are still viewable by the general public. This transparency helps reduce settlement times for claims by quickly validating each step and all details / facts in the process among multiple departments, simultaneously through the blockchain. This also makes auditing each file more efficient during periodic reviews.
> Fraud prevention -- Having an immutable record of transactions also helps deter fraudulent claims and potential losses.
The insurance industry has started its own blockchain developments through consortiums, most notably the Blockchain Insurance Industry Initiative (B3i) which was created at the end of 2016 in Europe. The focus of the group is in creating, testing, and developing prototypes for commercial uses - - a recent sample involved a pilot with catastrophic loss claims.
Overall, the insurance industry and its legacy systems and processes filled with huge volumes of data, is ripe for disruption and innovation from blockchain technology. Improvements in transparency, efficiency, auditing, and fraud prevention will lead to trust between all parties and alternative methods in mitigating risk for this longstanding industry, and help propel blockchain to other applications and business sectors.
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