Insurance companies face a number of challenges as it
relates to complex compliance issues, limited growth in mature markets,
fraudulent claims activity, third party payment transactions and handling huge
amounts of data. With the onset of connected devices and the ever-growing
amount of data generated by the Internet of Things (IoT), insurers have to sift
through the data that matters in order to deliver tailored services and
products. Insurers must also evolve from a focus on purely financial-loss
compensation to a mode of physical-risk prevention in order to compete
effectively with disruptors in the space. This can only be achieved if they
have visibility into their data.
While blockchain might not be the end-all-be-all to problems faced by
insurers, it does provide foundational technology that promotes trust,
transparency and stability. Blockchain is in the early stages of adoption, but
there are already a handful of ways that insurers are leveraging the technology
to mitigate the abovementioned challenges:
· Security: Through its use of public ledger,
blockchain can potentially eliminate suspicious and duplicate transactions by
logging each transaction. Through its decentralized digital repository, it can
verify the authenticity of customers, policies and transactions by providing
historical records. This makes it more difficult for hackers to corrupt and
steal files.
· Big data: More connected devices are being used
every day, which is causing a spike in the amount of data insurance companies
need to handle. Blockchain can properly manage, share and monetize large
amounts of data. The benefit is that the technology can store static records and/or
data without central coordination and the data can be viewed by all parties.
Data is registered on the blockchain by creating a digital fingerprint using a
date and time stamp which provides both security and transparency. Streamlined
data can also make risk assessment timelier and more accurate.
· Third-party transactions: Blockchain can
handle the increase in third-party transactions and claims made through
personal digital devices. Blockchain helps reduce administrative costs through
automated verification of claims/payments data from third parties. Now,
insurance companies can quickly view past claims transactions registered on
blockchain for easy reference. This promotes higher degrees of trust and
loyalty between the insurer and customer.
· Smart contracts: Personalized contracts are beginning
to emerge in the insurance industry. These contracts connect real-time
information from multiple systems across physical documents and activities
which trigger processes like claims, payments and reimbursements faster and
with greater accuracy. This saves the insurance company time and money while
providing the customer with a better experience.
· Reinsurance: Within the reinsurance space,
blockchain can provide accurate reserve calculations based on current contracts.
This helps property and casualty (P&C) insurers who need to know how much
money is available as they pay claims. Blockchain can ensure that they are
rebalancing their exposures against specific risks. Insurance companies can now feel confident in their daily business operations.
(excerpt from text on https://www.cio.com/article/3301163/how-blockchain-is-disrupting-the-insurance-industry-for-the-better.html)
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