For those unfamiliar with blockchain, it might require a little explanation about the new technology that is always in the news and a hot topic in the business world. Blockchain consists of a data structure helpful in creating digital ledgers of transactions shareable within a distributed computer network. Blockchain is similar to writing in stone that remains unchanged and intact without any scope of tampering with the data. Thus, blockchain generates high trust among the stakeholders about information sharing because the system is secure and safe. Encryption of data ensures the complete security of records stored in the form of blocks from where the technology derives its name. It would require changing the entire data set to change a single record in the blockchain, which ensures secure transactions. Blockchain for insurance is a hot topic nowadays.
Industries are fast adopting blockchain technology for better efficiency, transparency, cost-saving, fraud mitigation, and faster payouts. Sharing real-time data enhances customer satisfaction, and companies in the service sector like the insurance companies are implementing blockchain technology.
Blockchain for Insurance
Customer satisfaction matters a lot in the insurance industry because customers expect to get the best value for money. The competition is intense in the insurance sector, and to stay ahead by providing a superior customer experience, many insurance companies are exploring the benefits of using blockchain for insurance. The moment is ripe to leverage blockchain technology to gain a competitive advantage. The insurance industry is ready to take the great leap forward for rapid growth and higher customer trust. How blockchain technology impacts the insurance industry will become clear ongoing through this article.
Current Issues and Bottlenecks of the Insurance Industry
Customers find it hard to understand insurance contracts that are usually quite complex because of the legal language. In addition, the process of filing claims during an accident or crime is highly cumbersome and complicated, filled with uncertainty about the outcome. The claims process is often a nightmare for customers that results in loss of faith in the insurance companies as customers feel deprived of the proper compensation.
From the industry perspective, with the rising threat of frauds and the constant tightening of the grip of the regulatory authorities, the industry feels strangulated. Frauds are a big headache for the industry, ranging from small fraud to fraud involving several insurance companies. Organized crime affects the insurance sector, and drivers deliberately cause accidents or pretend that some accident happened and file fraudulent claims. Scams cost the insurance industry heavily.
Smart Contracts Are the Way Forward
Ridden with multiple problems that have a long-term impact on the returns, the insurance industry is on the verge of a new dawn as it embraces insurance blockchain. Customers and insurers stand to gain from smart contracts generated using blockchain technology. The transparent system allows both customers and insurers to manage contracts conveniently and in a responsive manner besides ensuring that the contracts are irrefutable. The insurance companies can record the contracts and claims on blockchain platforms duly validated by the network. It will guarantee payment of valid claims only by rejecting multiple claims because the system would not accept several claims after recording the first claim for a particular event.
The claim settlement process will be faster because once the network validates and confirms that conditions are met, it will automatically trigger payment. It will be a safe, efficient, and quicker process as it eliminates the need for human intervention for checking claims several times to ensure their genuineness.
Streamlining the Insurance Process with Automation
Blockchain in insurance will ultimately streamline the business process by using automation that lends more transparency and speeding it up by reducing human interventions. The methods would be tamper-proof because data is irreversible once recorded on the blockchain. The technology generates smart contracts that can automatically vet data by comparing it with the terms and conditions.
Conducting insurance over blockchain accounts generates more trust among customers as the system generates reliable audit trails. Everyone can see what happened, and the logical outcome remains above any suspicion because nothing happens behind the scenes.
Blockchain for insurance can make insurance companies more profitable by eliminating frauds, gaining customer trust, and reducing operational costs.
