How Blockchain is Disrupting the Insurance Industry
Blockchain-based technologies extend beyond just supporting cryptocurrencies. One hot application in the insurance industry is the use of smart contacts, which let you store, verify, and execute code on the blockchain.
The idea is to provide complete glass-like transparency, efficiency, and robust security that will save insurers time and money, alongside ramping up customer satisfaction.
Pain Points Hammering Away at the Aging Insurance Industry
The insurance industry has complex, wide-ranging applications that are extremely outdated and time-consuming. For instance, underwriting, fraud detection, and identity management continue to demand hectic paperwork and manual processes that are slow and inefficient. Blockchain can support the above-mentioned areas by optimising efficiency and nurturing trust between all stakeholders.
Although blockchain technology is still improving, it can, even in its current form, help out insurance providers. From checking counterparty risks to digitally tracking medical records, blockchain will prove to be an absolute game-changer.
Below are three areas that will benefit from advancements in blockchain technology.
The healthcare industry is extremely complex and is marred by an inefficient system of providers, insurers, and patients. A single patient will see multiple doctors and specialists during the course of their life. Since so many parties are involved, it is difficult to share sensitive medical data between them. This often leads to insurance claim denials, which costs hospitals millions per year and is cited as a major reason for rising healthcare costs.
Outdated privacy laws mean that it is nearly impossible for insurers to analyse patient data to coordinate care.
However, the use of a decentralized ledger on the blockchain can provide patients with privacy while creating an industry-wide repository of healthcare data that can save the industry billions every year. Blockchain technology will loop in all hospitals, physicians, insurers, and patients into a single ledger that contains health care information – all while keeping patient information safe.
The home insurance market is also plagued with the same problems that the health industry is facing. Namely, it is difficult to collect data that is scattered across multiple different silos and controlled by different parties. To this end, blockchain enables automated real-time data collection, potentially making some claims processes much faster and affordable.
Insurance fraud costs companies an arm and a leg every year – costing well over £65.8 million in 2020 alone. It is challenging for insurers to detect fraud using their ageing methods. The slow, paperwork-driven process provides opportunities for fraud.
Blockchain can facilitate better communication between insurers to defeat fraudsters. By providing insurers with a distributed ledger, it becomes easy to identify malicious activities across an ecosystem. Major insurers around the world are investing in data collected from public and private companies to predict and analyse patterns of fraud.
It is worth mentioning that developing such an industry-wide fraud detection system is very difficult, mostly because of legal constraints that make it impossible to share personal data such as name, address, and date of birth. But once blockchain technology is properly rolled out to stop fraud, it will be a massive boon to the industry.
Insurance companies are beginning to align their standards and processes to become more compatible with blockchain technology. It will require lawmakers and regulators to provide the necessary framework for insurance companies to successfully use blockchain technology.
Writen by: Nick Fraser on 2021-05-25
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