Posted on Feb, 2019 by PINC Insurance
Blockchain technology has become one of the biggest talking points in the tech as well as finance world since the launch of the cryptocurrency Bitcoin in 2009. Since then several others have attempted to create their own cryptocurrency, while various corporations and governments around the world have explored the use of blockchain technology for technology and financial purposes.
The insurance industry appears to be one of the early entrants into blockchain technology as it looks for means to make transactions more efficient and reduce costs on the whole.
Blockchain has the potential to bring several benefits to the insurance industry – the biggest being transparency. The insurance industry makes a lot of efforts to crack down on false claims and accurately gauge actual extent of losses being claimed. Such applications can be made possible through a combination of big data and the internet of things. This would help certain lines of insurance such as auto, travel, property, and medical reduce losses.
Transparency will also be brought about by mutually agreed public ledgers. This will allow the entire insurance marketplace to share vital data accurately and in a manner that doesn’t put clients at risk.
Security is another aspect of blockchain that will allow the insurance industry to manage contracts smartly and efficiently. Because records are encrypted there can be no doubt about the features of electronically initiated contracts.
The digital nature & ease of integration for blockchain will also pave way for smart digital contracts. This is already being piloted in travel insurance wherein flight delays and coverage can be tracked automatically via information sharing networks.
Clients need not worry about privacy as well since blockchain entries are anonymous. This will be of great use as hacking threats and privacy laws create an increasingly difficult-to-work-in environment for all businesses.
Pricing may also benefit from blockchain as big data gets integrated. This will allow smart pricing to occur and rationalise premium rates without going through additional red tape.
And finally reinsurance and peer-to-peer insurance would benefit from the dynamic nature of blockchain. Reinsurance contracts could be drawn from agreed upon data while individual financers could be brought into the insurance market through a system similar to the Lloyd’s market. But for the moment insurers are looking to test practical applications in easier to manage products and systems.