The traditional insurance business model has shown to be surprisingly durable throughout the years. The sector is a fascinating mix of old and new. Many major conventional companies started as premiums paid to insurance companies for the right to indemnify others. However, as new technologies alter how customers interact with businesses and how goods and services are provided, traditional insurance is starting to feel the digital effect.
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Blockchain is one of the new technologies used to transform the face of the sector. In fact, most large-scale insurers have already incorporated these innovative methods into their businesses and made them available to their clients.
What is Blockchain?
Blockchain is more than just a digital currency. It is a transformative technology with the potential to revolutionize various industries. First, however, we need to understand that blockchain technology and digital currency are two distinct concepts and that the applications of both technologies extend far beyond financial services.
The blockchain is a distributed ledger technology that maintains a continuously growing list of records, called blocks. The blocks are linked by cryptography to ensure that each block contains the correct and immutable data.
The Insurance sector can leverage blockchain technology to improve market transparency, efficiency, consensus, immutability, and provenance.
Insurance businesses compete fiercely for the business of both retail and corporate clients, who demand the best value and an exceptional online experience. In addition, consumers continue to purchase new policies over the phone; many policies are still processed using paper contracts, with no digital records of the policies, and the list goes on. Hence, both retail and corporate consumers of insurance firms demand the best value for their money and an exceptional online experience in this highly competitive market.
Although the insurance industry has a well-earned reputation for being slow to adapt and evolve, as technology permeates every part of our lives, it seems that the good old reputation might be up for a change—and blockchain may play a significant role in the future of the industry. As a result, blockchain technology gives the insurance sector a chance for growth and positive transformation.
How can blockchain change the face of transit systems?
Blockchain implementation can solve many of the problems associated with insurance policies. These problems include getting customer authorization or approval and working together to utilize funds in shared resources and infrastructures. Through blockchain, accurate, immutable, and real-time records can be kept of every detail pertaining to a policy. This provides each transaction’s dates, timings, participants, settings, and values. Blockchain is safer than any other technology to date since it distributes consent, protecting this information from any unauthorized or unlawful alterations and manipulation. Here are a few use cases of blockchain integration in the insurance industry:
Fraud detection & Prevention
A tamper-proof consumer data repository that can be reliably exchanged between enterprises can be established using blockchain. This system of cooperation will also help reduce the danger of error and the need for duplication of work, saving time and resources. Further, the technology enhances client activity visibility across banks, enhancing regulatory compliance.
Automation of Claims
The claims process can be made more efficient through automated procedures that can reduce the time required to manage each claim transaction by up to 90%. This could be achieved through smart contracts that are run on a blockchain infrastructure. Claims processing using blockchain can assist in creating a trustworthy, transparent, and customer-focused business model. A direct link between the claimant, insurer and third parties can be established in place of the traditional time-consuming procedure, allowing all data to be directly submitted and providing an audit trail. It wouldn’t take much support from outside stakeholders to make the claims procedure insurance company-centric.
Insurance Distribution & Availability
Consumers may easily toggle between activating and deactivating their insurance coverage with on-demand insurance. However, the more times all parties involved engage with the policy documents, the more difficult it is to manage the records. Blockchain has the ability to inexpensively coordinate the activity of numerous participants in an online marketplace. Thanks to technology, customers can manage several policies on the same platform and provide direct access to multiple stakeholders. It will facilitate quick, simple, and affordable transactions for paying premiums or claims.
Data Accessibility and Management
Data accessibility is crucial since the insurance sector is based on the risk assessment model. However, due to data confidentiality terms, it can be challenging to make claimants’ data accessible to insurance companies. Clearly, such a data flow could influence how health insurance providers decide how much to charge for premiums or what is covered under policies. Due to its cryptographical security, blockchain enables sharing of such private information without jeopardizing patient confidentiality.
The insurance sector has been slow to adopt technology, but it seems that the time is ripe for the new wave of innovation that is blockchain. The critical question that looms, however, remains whether or not all insurers will agree to comply with such a change. Once this hurdle is passed, we will see a substantial impact of blockchain on the insurance sector. There are a host of advantages that blockchain offers to insurers and their clients alike, both in terms of increased accuracy and efficiency as well as improved privacy and security measures. And once a clear regulatory framework has been established so as to ensure compliance, there’s no telling how much these advantages will benefit the business of insurance companies worldwide.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.