What is Blockchain?
With the increase in uncertainty of human life and property, people are doing insurance for all-important living beings. In the current scenario, it also helps the industry grow more efficiently. It is a distributed database. It shares among the nodes of a computer network as a database. It stores information electronically in digital formats. It guarantees the fidelity and security of the data record and generates trust without the need for a trusted third party. Data is stored in blocks, and all blocks are encrypted. Peer-to-peer networks are used to manage blockchain. Once data is stored in the blockchain, it is impossible to change. It is an immutable ledger.
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In reality, the insurance industry is mostly based on paperwork that causes fraud and is time-consuming. Due to paperwork, sometimes the customer's important information loses, which causes the customer problems. Considering it in the industry, customer information will save also. Once a customer's record is saved in the blockchain, no one will be able to change the customer record.
Digitisation and Automation in the Insurance Industry
The insurance industry and customers are affected due to fraud reports and fraud insurance accounts for property and casualty losses. That's why it applies many strict rules and regulations. It can be an option to solve such problems. Though it can be an option for solving fraud reports and accounts-related issues, companies and the government, till now, don't legalize it. Till now, in the insurance industry, paperwork performs, causing time consumption also money consumption. With the help of it, time and money will save and industry deals with sensitive cases like life insurance etc., where the customer's data security is a major issue and blockchain helps to solve such problems; once its data is stored, data can't be changed by others.
- Payment verification, like financial transactions such as claim collection or payment process, will be faster and more accurate.
- Also, reduce regulatory oversights of insurers and the associated costs.
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Benefits of Blockchain Technology in the Insurance Industry
- Enhances Efficiency: The Industry performs paperwork. Those papers' works are time-consuming. It can complete these tasks faster.
- Increases Trust: It also ensures security and stores data in an encrypted format; once data is stored in ledgers, changes are impossible.
- Claims Processing: It enables real-time data collection and analysis.
- Smart Contracts: These programs contain the user's contact information and contain logic. When that logic meets, then automatically, it's triggered.
- Prone to Cyber Attacks: The blockchain market is highly rich. With time more people join blockchain technology possibility of cyber attacks increases.
- Loss of Integrity of Data: The integrity of data must consider the validity of every transaction. It can break data integrity. It is necessary to ensure data feudality and maintain data integrity.
- Cost of Operations: With time it is going to be more popular that's why it is very hard for all insurance companies to adopt this new technology.
- Blockchain Privacy: In cryptocurrency, it is publicly available. That's why anyone can access the block. Though they cannot change the block, they can know every piece of information. Big threat of this technology.
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Top Blockchain Use Cases in Insurance Industry
The use cases of blockchain in the insurance industry are listed below:
Registries of High-value Items and Warranties
It is immutable and trustworthy. It will improve the organization's workability. It can track product ownership and claims in real time and even across borders. It can enhance industry-wide efforts to migrate claims and fraud through superior data and data sharing.
Know-your-customer (KYC) and Anti-Money Laundering (AML) Procedures
A tamper-proof repository can establish with it, and also possible to share customers' information with organizations. It will reduce the risks of error, solve data duplication problems, increase customer visibility and save time and resources.
Impacts on Parametric Insurance
Companies try to automate all processes with it. Automatically all transactions will be complete with the help of it. No human intervention will need. It will also deeply impact insurance-linked security, crops, flight delay, and cancellation.
It can allow insurers, brokers, and regulators to share data in real time. Automate risk modelling, audit, and compliance checking. Bind towers of risk and treats on single timestamped smart contacts.
Impact on the Distribution of Insurance
It can coordinate the action of multiple parties at a low cost in a marketplace. Making transactions for paying premiums or claims fast, easy, and cheaper will be possible. It can give the facility of managing various policies on the same platform.
Fraud Detection and Risk Prevention
The cost of insurance fraud increases per year. The outdated process of it leaves room for error and potential fraud. To combat this, insurance companies could store claims and ledgers that would help them communicate and help to understand suspicious behaviour.
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Impact on Peer-to-Peer Insurance
It will enhance existing peer-to-peer models by automating tasks and holding funds in escrow on smart contacts.
Reduce Administrative Cost
It helps automated verification of policyholder identity, contract validity, auditable registration of claims, and data from third parties. It can increase transparency also. It can remove 15 % to 25 % of expenses.
Property and Casualty Insurance
Property and casualty insurance primarily consists of auto, commercial, and home. The process required manual entry, giving a chance of human error. It can solve this problem by using shared ledgers and smart contracts to issue new policies or claim the existing policies and also will make the new policy issue or claim process faster, more efficient, and more cost-effective.
Data Collection and Secure Storage
Data is stored in the block, and once data is stored in the blockchain, no one can change the data. With other technologies like Internet-of-things (IoT), and Artificial Intelligence (AI), it can collect various useful data. For example, in health insurance, a company decides to give a low premium based on oxygen level, sleep time, etc. Data is collected by IoT and stored on the blockchain. Finally, the company will analyse the blockchain-stored data with AI and decide on the premium.
It is our future technology, as well as our present. Nowadays, cryptocurrency is used to stop fraud, prevent crime, and detect criminals. Cryptocurrency is an application of the blockchain. Many governments have announced cryptocurrency legal. To adopt everyone with it, governments can take fruitful steps. Many companies group and started working on it. It is a new technology. In the upcoming future, it is going to be the trend. With the benefits, blockchain technology has few risks that can be overcome with social awareness.