As eventful a year as 2020 was, it certainly seemed quiet for blockchain. Yet the technology is still being explored and pushed forward to fit new use cases. It continues to mature — and continues to attract more growth and investment. Big names from Facebook to Mastercard have created entire divisions devoted to blockchain.
Some of the best blockchain use cases actually come within the insurance industry, which is primed to take advantage of blockchain benefits. In fact, the below three benefits are already showing great promise:
1. Blockchain is trustworthy and helps reduce fraud
Blockchain’s first major benefit is its trustworthiness. Its ability to have consensus algorithms built into it enables provenance, auditability and immutability. This makes it easier to build smart contracts on blockchain, which could hugely benefit the insurance industry.
Hosted on blockchain, smart contracts have the terms of an agreement between two parties written into lines of code, which allows the contract to self-execute upon meeting the agreements of the contract. Because blockchain is an immutable ledger, smart contracts enable timely, transparent and trustworthy transactions.
Blockchain can also provide an entire proof-of-insurance ledger, meaning your company will no longer have to rely on one-off state databases. An industry-wide shared claims ledger available for inspection, with no per-transaction charge, can also help reduce fraud. Plus, with regulators able to monitor all insurance variables on the ledger in real time, auditing will become much smoother and less burdensome because of blockchain.
2. Blockchain enables more automation
Smart contracts do more than enable transparent transactions. They can also streamline the insurance process.
Because it stores the immutable terms of the contract, a smart contract can facilitate and enforce the contract and its performance. The entire insurance claims process can be streamlined because blockchain executes on the terms of the smart contract — and it does so automatically, making automation a big benefit of blockchain. For example, with blockchain, impacted assets and insureds are immediately confirmed at First Notice of Loss.
The payment piece of insurance can also become streamlined and more trackable. When you have payment information within the blockchain database, this can expedite multiple payments being made to different parties as per the smart contract and determination of liability.
Overall, blockchain can save insurance companies a lot of time, effort and money by lowering administrative costs.
3. Blockchain can help collect and store more useful data more securely
Insurance companies thrive on data. In concert with other technologies like internet of things (IoT) and artificial intelligence (AI), blockchain can collect a range of usable data.
For example, if an insured wears a fitness watch and agrees to share data — metrics such as heartrate, oxygen levels and sleep times — you could offer them a lower premium on their healthcare insurance. Data collected by IoT is stored on the blockchain and then read by AI, helping your company make better decisions on insurance premiums.
The same thing can happen with vehicles. IoT devices monitoring a vehicle can qualify insureds for safe-driver discounts and give your insurance company more data on driver habits and vehicle performance to work with.
Is your insurance company ready for blockchain?
It only takes a couple of innovative players to move the needle on adoption of new technologies. Cryptocurrency is already a household name and has been for a while. Banks are starting to provide custodian services for cryptocurrency. Soon, insurance companies will begin accepting payments in cryptocurrency. Wider adoption of blockchain outside cryptocurrency will follow.
Insurance companies are already coming together in groups to develop blockchain solutions and make them scalable across the industry.
If your company is looking into blockchain solutions, Wipfli can help. Our team is experienced in not only providing awareness and education services but also building proofs of concept around specific ideas. Blockchain is not a one-solution-fits-all technology and should be tailored to your company’s needs. By providing boardroom blockchain education, we can first help your executives understand what is possible for your company to achieve with blockchain and how to get started. Contact us to learn more.
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