Distributed ledger (or ‘blockchain’) technology, has risen to prominence in recent years as the underlying architecture supporting crypto-currencies like bitcoin. However, beyond the bitcoin craze, technologists and business leaders quickly saw the opportunity for the blockchain to provide greater trust for a variety of other transactions, engagements and commitments.
In fact, as the potential for blockchain became clearer, many started to think that blockchain would be the defining technology for the next era of our digital world.
Blockchain is essentially a shared, decentralised and cryptographically-secured database. It can record the details of almost anything, such as monetary transactions, contract agreements, personal identity details, or records of physical assets.
Therefore, in the insurance industry, blockchain could have a massive impact on the way that assets are insured.
The core features of blockchain makes the technology very attractive to insurers. Blockchain provides an immutable and permanent record of transactions, transparently available to all authorised participants, with no intermediaries or brokers of information.
This could have a very disruptive effect on the way that insurers share data, process claims and prevent fraud.
Locally, some financial services companies have started investing in this technology and exploring different use-cases but, when it is compared with its cousins like robotic process automation and cognitive intelligence, very few firms have been able to find those ‘quick wins’ that show the immediate value of the technology.
Despite this, there are five areas in which blockchain will reshape insurance:
- Smart contracts… with the details of an insurance contract established on the blockchain, all parties (such as underwriters, reinsurers, consumers and industry ombuds) would have access to the same datasets. As claims are submitted, the smart contract checks certain conditions have been met and only pays out the valid claims – without the hassle of going back and forth searching old document sets, emails and human interventions.
- Know your customer… currently, every company (including insurers) has a slightly different way of confirming the identity of new customers. But with the blockchain, it becomes possible for customers to create something of a ‘digital passport’, which can be accessed by different service providers. Insurers can cut out huge amounts of time and investment in building their own compliance and onboarding policies, and instead rely on the trusted identity information on the blockchain.
- Payments… for global insurers (or, insurers with global ambitions), blockchain allows firms to create a global financial ledger of all operations – even if they’re spread across different countries – facilitated by crypto payments between their various offices for all internal transfers. This reduces the need for expensive and lengthy cross-border transactions between different areas of an insurers international business divisions.
- IoT innovations… the latest-generation of home sensors, vehicle trackers, asset tracking devices and personal health and fitness tools represent a golden opportunity for insurers. Suddenly, they’re able to provide personalised pricing based on a very clear understanding of one’s risk profile. Yet, for IoT-based insurance to truly take off, the data needs to be stored in a tamper-proof environment like blockchain. Though a consumer might only take out a new insurance policy this month, the insurer would benefit from them being able to share my personal health details, or driving behaviour, over the past few years.
- Minimising fraud… insured assets can be added ‘to the blockchain’ using unique identifiers such as serial numbers, so that there can be no mistaking which asset is which. This helps to reduce the amount of insurance fraud, which is currently the scourge of the industry. From a risk profiling perspective, insurers can gain greater context – such as a store that needs to be insured against fire or theft. With trustworthy data added to the blockchain, the insurer could get accurate records of crime statistics for the shopping mall in general.
For local insurers, it’s critical to partner with established technology leaders that have proven experience in the blockchain field and have already invested in developing solutions and applications that can be tested and customised to the insurers’ unique needs.
The blockchain landscape is incredibly exciting, but it can also be bewildering, leaving you with no idea where to start. Find the right blockchain partners that you can trust, and grow your vision over the long-term, as you reimagine everything from internal processes to external service offerings.
By Kumar Uptal, Regional Sales Manager for Banking and Insurance at In2IT Technologies