Blockchain technology in the insurance industry
The insurance industry, which has already launched its process of Digital Transformationand has even incorporated Innovation and Digital departments in its organizational charts, has not yet implemented in many cases tools such as blockchainable to achieve great results with respect to three of its major challenges: transparency, flexibility and fraud prevention.
Blockchain works as a large blockchain that streamlines transactions and reduces operational and administrative costs. Moreover, as it is a “network” in which information is shared among the parties involved in the transaction, it is easier to detect possible forgeries thanks to the ‘tokenization’ of documents and the recording of each transaction in this “distributed ledger”.
Applications of blockchain use.
Although it is not yet fully implemented in the insurance sector, experts assure that it will be applied little by little in different aspects or activities of the insurance industry, such as payments, claims management or the generation of smart contracts. The report by
Markets and Markets
reinforces this claim when it states that the market for this technology will reach $1,393.8 million in the insurance sector by 2023.
As mentioned above, one of the main applications of blockchain in the insurance sector are the
Smart Contracts
. At
our previous post on this technology
we explained what smart contracts are all about. Starting from the autonomous nature of the software on which they are based, we can say that it is a contract that is generated automatically thanks to
blockchain
which in turn functions as a decentralized intermediary between the parties, in this case, between the insurer and the client. In this way, the contract, controlled by the insurance company, is automatically executed when the conditions stipulated by the insurer are met, thanks to a computer code, being able later, for example, to make immediate payments in case of indemnities.
In the case of the insurance industry, Smart Contracts can go further, improving the customer experience. For example, if the customer would like to have several quotes before deciding on one insurer or another, it would be as simple as sharing his claims history anonymously with the different companies. The information reaches each insurer, and each insurer in turn sends a smart contract. The customer selects the one he/she is most interested in, and the contracting is automatic. After verification of the client’s identity, the payment is made immediately and the client receives his receipt and certificate on the spot, being able to enjoy the insurance from the first minute. This is even more efficient when it comes to new products within the insurance industry, such as per-day insurance or pay-as-you-go policies.
The same speed as with car insurance can be achieved with health insurance, which has a particularity that sometimes limits the agility of its contracting: the confidentiality of medical data. The problem arises with the exchange of information between the different stakeholders: customers, patients, hospitals and insurers. Blockchain allows us to have a unique clinical history that can be shared, of course, always with the client’s consent, guaranteeing the security of such information at all times, for example, through timestamps.
The advantages of its use in the insurance sector.
If there is something positive for the customer, it is that he has his own sovereign digital identity in this network, through which he will have greater control of his information, thanks also to the ‘tokenization’ of the data that make up his digital identity.
This technology will also be of great importance for such frequent procedures as complaints, which normally become too long and tedious for the customer. The information would be immediately accessible and the identity, as mentioned above, could be instantly verified. In addition, in the final claim process, blockchain helps especially to achieve a better customer experience, as claim payments can be made in real time.
Speed, reduced operational and administrative costs and better availability of information will allow insurers to focus on more customized products, and thus develop solutions for each type of client and for each situation. In the future, it may even be your own digital identity that will be responsible for taking out insurance, for example, on a pay-per-use basis, when the customer needs to take a specific trip, automating and making the process much cheaper.
In short, the future of companies will depend not only on blockchain, but also on their ability to adapt to new customer needs. Blockchain, Artificial Intelligence or Internet of Things are nothing more than tools to create a business model that is flexible and anticipates what the customer needs or may happen to them, to improve their experience and reduce the company’s costs.