The blockchain is going to be a way for insurance companies to reduce costs massively. We have spoken with a number of insurance companies that are beta testing blockchain solutions to verify insurance claims. This cuts out a huge administrative cost for insurance companies.
Blockchain in insurance, like blockchain technology itself, is in its infancy, but on the peak of rapid expansion. Insurance companies that see the potential and are proactive in its adoption will likely be the frontrunners in innovation and ahead of the curve when the benefits are fully realized. There is an opportunity for efficiencies in transparency and cost-cutting, and a few high-profile applications are taking hold. When the regulatory landscape evolves with the technology, more insurance companies will likely follow.
How blockchain can help the insurance industry
1. Fraud detection and privacy will likely be the biggest trend/benefit. By tracking claims onto a blockchain, it can eliminate many of the common areas of fraud and allow companies to detect trends in claims. Furthermore, medical records would benefit significantly from a blockchain, where the provider can share secured files much easier.
2. Risk prevention: With blockchain, companies can avoid common sources of fraud by moving insurance claims onto an immutable ledger. Blockchain smart contracts can turn paper-based contracts into programmable code that helps automate claims processing and calculates liabilities in insurance for all players involved.
3. Reinsurance: With blockchain smart contracts, reinsurance contracts can be secure and protected simplifying the flow of payments transactions between reinsurers and insurers.
Health insurance- With the blockchain, health providers can share medical records that are cryptographically secured between each other increasing interoperability in the health insurance ecosystem.
4. Blockchain has the potential to eliminate errors and detect fraudulent activity in the insurance ecosystem.
5. Blockchain establishes an efficient, transparent and customer-focused claims model based on higher degrees of trust.
6. Blockchain provides more efficient data sharing and stronger safeguards against fraud.
7. Blockchain offers new opportunities to streamline payments and attract financing risk.
In P&C insurance audit trails become more comfortable to follow, modelling requirements are highly reduced.
Which company has implemented blockchain in the insurance company?
Giant insurance players like Allianz and Swiss Re are implementing solutions.
Allianz has a well-publicized blockchain technology that executes swaps through smart contracts involving catastrophic insurance. Several other companies are looking into medical records and systems to provide cryptography and timestamps for efficiency and cost savings.
The biggest challenge to blockchain adoption is that the regulatory treatment is unclear for many uses with blockchain and virtual currency technology. It seems as if every federal regulatory agency has chimed in on cyber issues, but none have taken the lead. Until the regulatory structure is clear, many companies will be hesitant to use the technology to innovate their business processes.
Final thoughts: Blockchain has vast potential. Insurance companies looking to innovate and are proactive in its uses will likely reap benefits in ways we can imagine and in likely unimagined areas. As the regulatory framework progresses with innovation, companies will benefit. But that regulatory framework will likely lag the innovation, and frustrate those willing to adopt new technology.