Blockchain in insurance: Decrypting the Bond

By : |February 28, 2020 0

Blockchain in insurance: Blockchain is a trending technology. While businesses have an overview of how they can benefit from it, the technology is not yet entirely unravelled. This is because of its seemingly complex nature. Usually, Blockchain is associated with cryptocurrency or to be specific, Bitcoin.

After the downfall of bitcoin, the business world was abuzz with all sorts of blockchain news; good, bad, and strange. Some even termed the technology to be as revolutionary as the internet!

In 2020, the noise has subsided and one can listen to the lyrics and the music of the Blockchain song more clearly. Blockchain and other technologies can have a far-reaching impact on several industries, including insurance.

The insurance industry is plagued with issues related to trust and shallow customer satisfaction. Blockchain coupled with other technologies can help overcome these issues by analysing risks, reducing fraud, fast-tracking claims, and a lot more. Read ahead to decrypt the bond between Blockchain and insurance.

Unlocking Blockchain

A blockchain can be understood as a secure ledger containing a decentralized record of transactions. These records can be distributed among several participants or a network. Such a network can be entirely decentralized or can have some access. Bitcoin is an example of a decentralized network while a consortium is an example of permissioned access.

Transactions in a Blockchain environment are cryptographic where they are safe and trackable. In the case of a decentralized environment, there is no central authority that can access and modify the data, thereby foiling data fraud. As Blockchain is safe, transparent, and trustworthy, it is apt for businesses that require transactions to be secure, time-stamped and shared. All this makes it a perfect fit for the insurance segment.

Insurance Issues

Various parties or business units transact with each other to offer a seamless insurance experience to the policyholders. In most cases, these parties or business units find it difficult to depend on each other, thus they perform their own checks. This results in redundancy, for example, Know Your Customer (KYC) checks at multiple levels.

When there are brokers, reinsurers, vendors, etc. involved, it might lead to a lot of documentation. Multiple documentation opens the opportunities for a cyber-attack and increases the chances of fraud. Besides, there can be issues related to human errors as well. In certain cases, a company’s legal division might have strict rules regarding due diligence that force departments to rely on their mechanisms for better accountability, resulting in repetitive checks.

The Blockchain Solution

The Blockchain solution is embedded in its distributed ledger technology. Its secure ledger does not allow manipulation of data. The technology also creates a trackable trail of transactions, which improves transparency and accountability. As a Blockchain system is not required to be monitored by a central authority, such a distributed ledger enables trustworthy collaboration between parties.

Concerning fraud prevention, data can be shared securely among parties and business units. Patterns can be analysed and losses can be prevented. A claims system based on the Blockchain platform can offer efficient data processing and reduce redundancy when it comes to the sharing of information between different parties and business units.

Animesh Das, Head of Product Strategy, ACKO General Insurance

Animesh Das, Head of Product Strategy, ACKO General Insurance

The Blockchain solution will make the insurance experience simple, safe, and seamless with Smart Contracts, which are codes that execute a task when predetermined terms and conditions are met. Here’s an example of a flight-delay claim with Smart Contracts. When the authorities confirm the specific flight is delayed by specified hours, the claim amount can be automatically generated without any action from the policyholder or intervention of third parties.

The Right Match

Insurers are yet to realize the technology’s full potential. The right match of the technology and the application has still not been established on a large scale. The more insurers continue to decrypt the bond between Blockchain and insurance, the better they will be at maximising the potential of this technology to simplify back-end processes and make the overall experience more customer-friendly.

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