Insurance, one of the crucial industries, holds a lot of confidential data. Blockchain helps in not just securing the data but progressing the insurance processes as well.
Lengthy paper-based processes and contracts, hectic consumer follow-ups, and not so secure functioning, is what the insurance sector flaws in, today. Even though it’s been decades that the insurance industry is progressing, in terms of policy making related activities, it still lags in the accurate use of technology for securing high-value confidential data.
Blockchain technology promises an easier, faster, and cost-effective functioning, making it better than before, by multi-folds. A slower complex functioning can be turned into a faster, simpler, and highly secured one.
Crucial Insurances like health and life, often come with a cost of administrative paperwork, reconciliation, and so on. Blockchain deals with all of these and helps create better work for the same. Even the claims and reimbursement processes can become quite accurate and simpler, saving ultimately a huge time incur, which has been the case for years. Also, the coordination cost amongst insurers, reinsurers, consumers, brokers can be reduced to a large extent, with the help of blockchain smart contracts.
Blockchain is sure to give a better transacting experience, both to the consumers and the insurance companies.
Some of the major Issues in the Insurance sector in the conventional system:
Plethora of confidential personal data, calls for vulnerability, and security risks. Moreover, the third-party involvement doubly increases these risk factors. This becomes the most crucial loophole to tackle, in the insurance sector.
Third-party involvement not only comes with the risk of data security but also, managing and coordinating the middleman is no less a cost, which ultimately affects the premium rates and consumer application rates.
Lengthy procedures and follow-ups and claim settlement traditional processes are a lot of time-consuming. This type of delay definitely hampers growth.
A complex involvement of third-party authority involves risk, cost, and trust issues. Trust is the fundamental trait that the insurance industry must abide by, these trust issues and fraudulent risks can at times collapse the entire business.
Complex and clumsy processes:
Centralized systems also lead to complex functions eg; need of multiple reconciliations, complex data collection process, and clumsy consumer follow-ups altogether.
Partners involved in the Smart contract of Insurance sector:
A transaction that occurs, needs to be verified, given a hash or unique code, and then stored in a block to be added in the blockchain. Smart contract logic helps to achieve that.
After certain predefined conditions are met, these sets of programs are auto-executed. These smart contracts would reduce paperwork and are comparatively cheap, apart from making real-time quick payments robust, secure, and quick.
Blockchain smart contracts will bring about the coordination amongst the partners involved, like consumers, insurance policymakers, insurers, reinsurers, administration workforce, and the related external parties. Manual Errors and security risks shall be reduced to a larger extent.
How Blockchain can help overcome the issues and improvise the system:
Time Sensitive system:
Reduced time is directly proportional to more productivity. Blockchain can help in faster processes, right from consumer building to claiming processes.
Secure and trustworthy system:
As the system shall become decentralized and immutable with help of blockchain technology, it would provide a secure fence to the insurance companies and its data with reduced risks of information leaks, ultimately making the system trustworthy.
Claims Processing made easier:
Real-time data collection through blockchain can make processing claims, renewal of policies, and various related activities, easier and simpler.
Record keeping intermediaries and central authority involvements are eliminated in the blockchain-based system. This saves huge costs, making the system more profitable.
The enormous data in the insurance industry that is of huge value can be structured with the help of IoT and blockchain. Real-time data collection and security make the data structuring easier.
Fraud Detection and Risk prevention:
Even in the era of digitization fraudulent claims occur, the immutability that the blockchain brings, timestamps the data, and reduces the risk of frauds, preventing risks involved.