From Life to Health: Blockchain is Transforming the Insurance Industry
Blockchain, the decentralized ledger technology (DLT) is just breaking the surface in the immense potential to revolutionize nearly every industry in the global economy, including finance, healthcare, supply chain management, and more. One industry that’s definitely worth our time exploring is the world of insurance and re-insurance.
Why is it worth taking a look at? Well, according to a report by MarketsandMarkets, the global blockchain in insurance market size is expected to reach USD $1.4 billion in 2023 — up from $64 million in 2018. Plus, a report by Deloitte found that 74% of insurers are either researching or piloting blockchain technology, and 14% have already implemented blockchain-based solutions.
The insurance and re-insurance industries are complex, with numerous stakeholders involved, including policyholders, insurers, reinsurers, brokers, and regulators. The adoption of blockchain technology in these industries could potentially streamline processes, increase transparency, and reduce costs.
One of the most significant use cases of blockchain in insurance is the creation of smart contracts. These self-executing contracts can be programmed to trigger specific actions based on predefined conditions, such as the occurrence of an event or the fulfillment of a particular obligation. In insurance, smart contracts can automate claims processing, reducing the time and costs associated with manual processing. For example, a smart contract can automatically release a payment to a policyholder when a predefined event occurs, such as a flight delay or a car accident.
This technology is critical now more than ever due to the growing climate change crisis and the catastrophic weather events that have resulted. For example, if there is a flood or high wind event, a policy could be triggered via a smart contract without any human involvement. And, if the policy holder meets all the parameters, then they could be paid immediately through the blockchain — eliminating much of the current claim pain points during these types of events that are becoming all too common.
Blockchain can also facilitate the sharing of information among different stakeholders, increasing transparency and reducing the potential for fraud. Insurance companies can use blockchain to store policy information, claims data, and other relevant information in a secure and transparent manner. This can help prevent fraudulent claims, as insurers can quickly verify the authenticity of a claim by accessing the relevant information stored on the blockchain.
Re-insurance companies can also benefit from blockchain technology. Re-insurance is the practice of insuring insurance companies themselves against catastrophic losses. Blockchain can help streamline the re-insurance process by enabling faster and more accurate tracking of data related to the underlying insurance policies. Re-insurance companies can use blockchain to track policy information, premiums, and claims data, enabling them to make more informed decisions about which risks to take on and at what price.
Moreover, blockchain can help improve the customer experience in the insurance industry by providing policyholders with more control over their data. Blockchain-based insurance solutions can give policyholders the ability to manage their policies and claims data securely and transparently. This can lead to increased trust in the insurance industry and improved customer satisfaction.
The adoption of blockchain technology in the insurance and re-insurance industries has the potential to streamline processes, reduce costs, increase transparency, and improve the customer experience. Companies like Lemonade, which combines AI and blockchain technology to offer home, car, pet and more insurance are leveraging the power of blockchain’s smart contract technology to simplify and modernize the insurance ecosystem. Yet while there is plenty of innovation, there are still some challenges to overcome, such as regulatory hurdles and the need for interoperability between different blockchain solutions. That being said, the benefits of blockchain in insurance are too significant to ignore across all insurance types.
Health Insurance: In health insurance, blockchain can be used to improve the accuracy and security of medical records. Patients can have their medical data stored on a blockchain network, which can be accessed by doctors and other healthcare providers. The blockchain-based system ensures that the medical data is secure, tamper-proof, and easily accessible to the authorized parties.
A company named Medicalchain is already offering a blockchain-based platform for storing and sharing medical records, while Blue Cross Blue Shield’s (BCBS’) digital solutions arm created a blockchain consortium called Coalesce Health Alliance. The partnership is evaluating blockchain as a means of streamlining healthcare data exchanges among BCBS players.
Additionally, Avaneer Health, which designed a blockchain-based architecture to enable secure and streamlined transactions for its participants is now being backed my blue chip insurance behemoths Aetna, Anthem, Cleveland Clinic, Health Care Service Corporation, PNC Financial and Sentara Healthcare — solidifying blockchain’s staying power in the vertical.
Car Insurance: Blockchain can help streamline the claims process in car insurance. For example, when a car accident occurs, the blockchain can be used to store and share information such as the accident report, photos of the damage, and police reports. This can speed up the claims process, reducing the time it takes to settle a claim. Moreover, blockchain can also help prevent insurance fraud by verifying the authenticity of the claim data. A company named Insurwave is already offering a blockchain-based platform for marine insurance, which can also be extended to car insurance.
Homeowners Insurance: In homeowners insurance, blockchain can be used to improve the transparency and security of property records. By storing property records on a blockchain network, homeowners can have a tamper-proof and transparent way of verifying their property ownership. This can help prevent disputes and fraud related to property ownership. Moreover, blockchain can also be used to automate the claims process in homeowners insurance. For example, if a natural disaster damages a property, a smart contract can automatically initiate the claims process, reducing the time and costs associated with manual processing.
Re-insurance: Re-insurance companies can use blockchain to streamline their operations and improve their risk management. By using a blockchain-based platform, re-insurance companies can have a transparent and secure way of tracking their underwriting, claims data, and risk exposures.
Blockchain + Life Insurance
Let’s not forget about one of the most complex forms of insurance — Life Insurance. From fraud to family disputes, blockchain technology has the opportunity to right the wrongs that have riddled this form of insurance for decades.
Blockchain can also be used in this corner of the insurance ecosystem to enhance transparency, security, and efficiency in several ways. Here are some examples:
Insurance is the Big Business that everyone loves to hate but needs — especially in the worst of times. What if blockchain could remove much of what insurance customers hate the most — creating massive efficiencies and offering a better customer experience? It’s possible and it’s happening. Companies like State Farm, Allstate and USAA are all working to incorporate DLT as part of their overall operations. And, much like legacy organizations from other industries, these giants are finding that blockchain isn’t just a “nice to try,” but rather a “need to have.”
Originally published at https://www.thestreet.com on April 10, 2023.
