The things Blockchain could do in the Insurance Industry
Blockchain is new. The Insurance industry is old. Explore how we can combine the best parts of both to produce a sustainable solution for companies and citizens alike.
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We’ve all heard and experienced the hype that surrounds blockchain technology. Every second article or document that is published relates to it in some way. To the general public, blockchain technology was introduced via cryptocurrency - Bitcoin. Due to it being used for not-so-ethical reasons, many have the idea that it is an ‘evil’ technology. Which is completely wrong, of course.
It is something that has the potential to redefine and shape up entire industries that have existed since the beginning of civilization.
The insurance industry is one such entity, and it has been in practice as early as the 1300’s. While insurance is a high-risk and high-returns industry, it also serves as an umbrella for those in need. Insurance also happens to have complete flexibility, as in, people are not entitled to stick to only one policy. There are no restrictions on the number of policies which one can take. An implication of this is that they have to manage the premiums for each policy, and also manage the troubles that originate with them. The only thing that matters to them is coverage and security in the case of an unexpected disaster.
Since being insured is important, many try to take advantage of the existing systems, and these contribute to certain fraudulent activities during the claim process. Along with this, most people work with a middleman, and that could lead to additional losses. Documents and paper trails lead to a plethora of confusion and unnecessary delays, and this can be highly undesirable. Thus, we use blockchain to give feasible and efficient solutions to the problems described.
Blockchain has certain properties - extremely useful properties - that will help us combat all these issues. The most important of these properties is immutability. This prevents records from being changed, and if someone tries to, only their node is affected. The next one is Smart Contracts. These govern what data is added to the network and validates it as well.
Getting to the Insurance industry, we can use Private and Permissioned Blockchain networks to implement and gain the benefits of the technology. Data tampering is resolved. The need for a broker is eliminated due to everything being digitized. Complete automation ensures no unnecessary delay. Suspicious behavior can be easily identified, due to seamless access to historical records, which also eliminates double booking. There is transparency, which minimizes manual review. Smart contracts govern how claims are added and also who is allowed to operate on them, ensuring Privacy. The sources that can verify the authenticity of a claim (e.g. Doctors in the case of a Medical Claim) can be present on the same network. All of this, when implemented rightly, can prove highly beneficial for all the entities present in the network.
Of course, there are hurdles and hurdles of legal specifications to go through, when we aim to disrupt an entire industry that hasn’t even embraced the cloud completely yet. But yes, it is possible to do so, and one day, hopefully, this is implemented.
We’ve thus used blockchain to formulate a solution that keeps in mind all the entities that play a role in the lifecycle of an insurance claim. The ‘what’ and ‘why’ have been answered here. The ‘how’ is even more interesting. Do have a look.