Does blockchain hold a place with the insurance industry?
The Insurance industry is a multiplex system. It involves assessing and managing an array of risks faced every day by large organizations and individuals, which in return means undertaking co-ordination of numerous parties’ and their records. The two factors of the insurance sector have attracted the interest of blockchain technology and naturally distributed ledger technology is the leading feature of the growing technology innovations coined as insure-tech, that are looking to explore new productiveness and efficiencies into the insurance sector.
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Blockchain itself is a structure of unmodifiable digital record-keeping that hold all processed transactions active across its network. The key aspect of Blockchain is that the technology allows the formation of transactions that are secure to acts of fraud and allows the creation of shared truth and the production of truth with no need of the centralization from a controlling party. This allows blockchain to considerable lower the risk and ultimately allows ‘peer-to-peer’ transactions, allowing independent groups to directly operate with each other. This allows blockchain in effect to revolutionize the conventional labor-intensive process into a cost-saving efficient system.
What does the integration of blockchain technology offer to the insurance industry?
One main aspect added by blockchain introduction into the insurance sector is identifying fraud and preventing it. Statistics from the FBI show that it is costing an estimated in excess of $40 billion a year which isn’t including the health insurance sector; showing the huge loss experienced from only fraud. This is a persisting issue for these companies but is also directly affecting the average US family as it causing insurance premiums to hike from around $400 to $700. Due to the sheer volume of fraudulent cases that these entities are having to deal with it is causing great losses affecting both the consumer and the insurer.
Blockchain can solve this issue by creating a better-managed environment with increased co-ordination between the insurers to tackle these issues of fraud. With the use of distributed ledger technology, it would allow a permanent record of transactions. The ledger would store these claims to create a system which would allow all insurers to access to the shared ledger to identify potential fraudulent activity taking place. This would be a huge improvement on today's methods of insurers who try and analyze large public data pools looking for suspicious activity to identify fraud which is often leading to wasted times and high wastage in data. Creating this system of an industry-wide network of data combating fraud would cut out these huge losses.
A common issue experienced when dealing with insurance firms is the data processing, due to a large number of people needing insurance in combination with the current inefficient data entry process of insurance companies. Blockchain would introduce properly managed systems of large data pools. It is capable of doing this as it can store static records with no need of central coordination and is still visible to parties that need access. The digital fingerprint created provides a more streamlined database increasing the efficiency of the whole process and it would save time and produce more accurate results.
With data input on the blockchain being unmodifiable and indefinite it makes the recorded data more accurate. This would solve issues currently faced in the insurance space as many projects can often find delays from inaccurate data and can ultimately lead to bad decision making. Delays cause time wasted on backtracking to solve these issues of inaccurate data and time is money. Data accuracy should be taken very seriously as it can ultimately lead to failed projects and if one component can lead to a whole project failing it should show the magnitude it should be held at. Accurate data is the core foundation of any project, this shows with the blockchain technology integration how integral this improvement would be upon the industry.