Blockchain is a hot topic these days. Many industries started to adapt to the new big technology. On this line, the Insurance industry has adopted blockchain technology.
The significant benefit of blockchain is building trust among parties by sharing information equally that is decentralized and transparent. Blockchain’s data are immutable and are shared between the network participants. It gets updated constantly in real-time and the changes will get reflected in other blocks on the blockchain. There is no central organization controlling the network, instead, it’s a peer-to-peer network.
Blockchain helps the insurance sector by providing countless features like reduced costs, improved customer service, productivity, transparency, and more.
The main reason to use blockchain in the insurance sector is fraud prevention and risk management. Even though the companies use many standard methods, it’s difficult to detect or prevention from fraudulent, yet they still raise high. Blockchain helps secure assets with a digital signature. This makes it difficult to commit fraud.
Blockchain stores records of claims and it is easy to track and process. This will reduce fraud and faster processing of claims as a result leads to a better customer experience. Smart contracts automate the claim submission process. The process will run smoothly as it is executed on smart contracts.
The most important process of using Blockchain is gaining trust. It creates trust between members and entities. Blockchain uses a consensus algorithm that allows audibility and immutability. This algorithm is used to create smart contracts in the blockchain which is beneficial for the insurance industry. Smart Contracts are agreements between two parties that are written in codes and will be executed automatically upon the conditions met. It enables timely, visible, and trustworthy transactions.
This includes the claims information that the insurers and reinsurers can exchange regarding precise policy contracts, risk sharing, and loss information costs. As the Blockchain provides an immutable record of claims and a timestamp when the claims are made, it reassures reinsurers that the information provided existed at that time.
In case of any problems or accidents in the home device or cars detected via the sensor, the device can use a blockchain smart contract to execute a set of instructions to transfer cash for the damage repair from the insurer. Blockchain also resolves the trust issues in IoT with smart devices that it may communicate and function autonomously.
Blockchain helps insurers maintain data integrity. It also verifies the authenticity of the claim. This is particularly true for insurance providers who use big data to gain insights into the risk profiles of their clients.