3 benefits of blockchain for the insurance industry
As eventful as 2020 was, it seemed quiet for blockchain. But don’t let that fool you.
Blockchain is still being explored and pushed forward to fit new use cases. It’s quietly maturing — and attracting significant growth and investment. Big-name companies from Facebook to Mastercard are dedicating entire divisions to blockchain.
Some of the best blockchain use cases come from within the insurance industry, which is primed to take advantage of blockchain benefits. In fact, three insurance use cases for blockchain are already showing great promise:
1. Blockchain can help reduce fraud
Blockchain is trustworthy. Consensus algorithms can be built in, which enables provenance, auditability and immutability. The ability to build smart contracts on blockchain could hugely benefit the insurance industry.
When smart contracts are hosted on blockchain, the terms of an agreement between two parties are written into lines of code. That allows the contract to self-execute once agreements are met. Because blockchain is an immutable ledger, smart contracts enabled with blockchain are timely, transparent and trustworthy transactions.
Blockchain can also provide an entire proof-of-insurance ledger, meaning your company won’t have to rely on one-off state databases. The sector could adopt an industry-wide shared claims ledger and make it available for inspection, with no per-transaction charge, to reduce fraud on a wider scale. Regulators would be able to monitor all insurance variables on the ledger in real time. Auditing would also become much smoother and less burdensome with blockchain.
2. Blockchain enables more automation
Blockchain can streamline multiple insurances processes — including the entire claims process.
Blockchain stores the immutable terms of a contract and can execute on those terms automatically. For example, with blockchain, impacted assets and insureds are immediately confirmed at First Notice of Loss.
Payments become streamlined and more trackable with blockchain, too. When payment information is in a blockchain database, insurance companies can expedite multiple payments to different parties, per the smart contract and determination of liability.
Overall, blockchain can lower the administrative costs associated with policies and save insurance companies a lot of time, effort and money.
3. Blockchain can help collect and store more useful data more securely
Insurance companies thrive on data. In concert with other technologies like the internet of things (IoT) and artificial intelligence (AI), blockchain can collect a range of usable data.
Data collected by IoT can be stored on blockchain and then read by AI to help your company make better decisions about insurance premiums. For example, if an insured person wears a fitness watch and agrees to share data — such as their heartrate, oxygen levels and sleep times — they could qualify for a lower premium on their healthcare insurance.
The same concept applies to vehicles. IoT devices can monitor vehicles in exchange for safe-driver discounts. IoT also gives insurance companies more data on driver habits and vehicle performance to work with.
Is your insurance company ready for blockchain?
A few innovative players can move the needle on new technologies. Cryptocurrency, which relies on blockchain technology, is already a household name. Financial institutions are starting to provide custodian services for cryptocurrency. Soon, insurance companies will begin accepting payments in cryptocurrency. Wider adoption of blockchain will follow.
Some insurance companies are collaborating on blockchain solutions so they can make them scalable across the industry.
How Wipfli can help
If your company is looking into blockchain solutions, Wipfli can help. Our experienced team can build proofs of concept around specific use cases and ideas. Blockchain is not a one-solution-fits-all technology and should be tailored to your company’s needs. We can help your team understand what’s possible for your business — and where you can get the most benefits from the technology. Let’s get started. Contact us to learn more.
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