Know about Blockchain, it’s potential and impact on the industry.
The insurance industry is going through a period of transformation and innovation, driven by regulatory and technology pressures, the demand for change from millennials and digital natives, the rapid strides in the area of Artificial Intelligence and the explosion of data.
Apart from the above, there is another development – Blockchain - that has the potential to make a deep impact on the industry. A blockchain is a type of distributed ledger where all data is replicated to all participants in real time, and the data is stored not in a central repository but across multiple servers and platforms, creating an environment of trust for both customers and insurance companies. Customers have greater certainty that their claims will be processed in a timely, transparent manner objectively, as human biases in the form of subjectivity and commercial influences could be taken out of the equation. Similarly, insurers benefit with the reduction in costs of claims validation, assessment and claims handling, due to automation. Current claims processes are dependent on multiple manual steps for validation and assessment.
The resultant objectivity and transparency reduces disputes and fraud costs. Smart contracts define objective policy criteria executable against independent and trusted authoritative data sources, reducing the scope for debate.
Implementation of Blockchain would lead to greater security, since transactions stored on blockchain are virtually tamper-proof. Being a decentralised database no single party can alter the transaction chain without the permission and knowledge of all other parties.
Blockchain can eliminate counterparties and create more efficient bilateral settlement relationships. Streamlined workflows and reduced paper processing could reduce overall processing times and costs.
Despite its several inherent advantages for the insurance industry, the implementation is still in its nascent stage, and for it to be truly cost-effective and effective, it needs to achieve critical mass, and industry-wide adoption across the entire chain, including at the regulatory level. At the same time, customers need to understand and be able to access and use Blockchain far more easily for it to be completely integrated into the insurance ecosystem.