Blockchain in the Insurance Industry

Blockchain has become a buzz word lately, especially in the financial industry. New to the world, it has already changed or improved, the manner in which the entire financial sector works. This comprehensive ledger can perform up-to-date accounting. It can keep a record of every transaction performed by various parties. The blockchain is a sales ledger having a decentralized database available publicly. It can record anything that holds value, be it the transfer of electronic cash or physical assets. Blockchain in the insurance industry, audit, accounting, supply chain and, in fact, in every domain of the financial sector has induced a huge impact.

How does the blockchain work?

A blockchain is a group of blocks that are cryptographically protected. Every transaction carried out is recorded in a chain creating a network. The members in the system can thus verify their transactions. Post verification, the transactions in the block are placed in a time-stamped linear form. Therefore, anyone can see the history of the transactions performed. The chain keeps regularly updating as and when a trade takes place. This functionality has established the blockchain to be the most secure forms of information.

Blockchain application in the insurance industry

Blockchain adoption in the insurance industry has massive opportunities. Right away from records to building trust, and saving costs and time, the blockchain is known to serve in every function of insurance activities. Let us find out what would be the major impact of blockchain in the Insurance industry:

Evasion of frauds

The blockchain in insurance industry will do a considerable benefit by evading fraud. The blockchain technology has a decentralized repository. It holds the historical records of every customer, every policy, and every transaction. If the insurers, customers and various other parties involved in the insurance transactions cooperate well, the industry can evade the frauds. Everyone will have to share their policies, products and everything included in the insurance. The history storage of these transactions can elude the fraudulent operations as well as keep a check on the robbery.

Build a factor of trust

The trust factor lacks immensely in the financial sector. People keep the large banks in between every transaction they carry out. This is to assure trust in transacting with various businesses. The lack of faith leading to the need for availability of large banking institutions has a lot of limitations. The first is the high-cost factor that the parties pay for banks behaving as the trust among them. Secondly, the inefficiency in the working of the insurance industry has led to people not trusting these companies. Thus, the blockchain solutions can eradicate the trust issues. Since it provides transparent records and does not require intermediaries, one can get rid of the substantial costs as well as build trust due to the efficient recording in the digital ledger.

Efficiency

The smart contracts have further brought efficiency in the claim processing. The issues currently persist between both insurers and the insured while transacting. While the insured find the insurance contracts to be vast and confusing, the insurance companies are still fighting the substantial fraud amounts. However, blockchain and smart contracts shall solve both the issues. Since blockchain records each and every transaction, it is easy to verify. If we submit a claim, only the valid claims get under the process. The blockchain applications have the power to generate the claim payment without intervening humans. This will, therefore, improve the speed and efficiency of resolutions for claims.

Final Words

Blockchain has the capability to remove mediators. It can enhance the transparency in operations. The technology will definitely do justice to the insurance industry.