How Blockchain Technology Could Impact Insurance
Estimated reading time: 2 minutes and 57 seconds
Despite their volatility, bitcoin and other cryptocurrencies have been garnering lots of media attention. And while analysts continue to evaluate the future of cryptocurrency, many industries are turning their attention to its underlying blockchain technology.
In fact, 67% of central banks have already begun experimenting with blockchain technology. That’s because blockchain technology, also known as distributed ledger technology, provides a path to storing and sharing information with greater transparency and added security. Essentially, this distributed online record-keeping system offers immutable and traceable data authenticity. And while the finance industry was quick to explore its benefits, the insurance industry is not far behind. Specific to the insurance industry, blockchain technology has the potential to simplify the claims process, lower costs and minimize fraudulent activity.
So, what does this all mean to the business owner and their employees who invest in employee benefits? Below we’ll explore how blockchain technology could disrupt the industry and offer tremendous benefits to insurance policy holders.
1. Greater transparency and trust
With blockchain technology, insurance companies would be able to easily share and store verifiable information with third-parties concerning every insurance policy. Information could only be updated by consensus and never be erased. Therefore, a blockchain-based public ledger can protect privacy while still allowing policy holders or rightful claimants access to their policy details and due funds. If we consider that there is approximately $7.4 billion in unclaimed life insurance money in the United States today because beneficiaries are unable to track down policy details of their deceased loved ones, then transparency derived from blockchain technology could be a game-changer.
2. Better personal data protection and easier customer onboarding
Data-processing can be a significant paint point for policy holders or employers when signing up for insurance or changing insurers. In some cases, the time required to collect and compile employee information can be dissuasive. With blockchain technology, there are possible solutions which could allow each individual to control their own personal information. That’s because once submitted, personal information would be verified and registered on the blockchain. Each individual could then forward their personal information to new insurers, without it needing to be verified again. This offers better privacy for the individual and faster onboarding.
3. Faster claims processing
Through blockchain technology, many applications are being developed and tested. One of these applications is called smart contracts. Insurers could essentially create these digital insurance policy contracts which would be recorded and verified on the blockchain. Then, when a claim is submitted by the insured individual, the system could confirm that specific criteria are met, that the claim is valid and then automatically issue payment without human action. Because blockchain technology is decentralized, the system could also detect and prevent fraud by verifying if the same claim has been submitted elsewhere. While this would require extensive collaboration between parties using blockchain technology, the opportunity to streamline the entire claims process is there. And this will make it faster for insured individuals to submit and receive payments for valid claims.
The Future of Blockchain
While there’s a buzz in the air about cryptocurrencies and other blockchain applications, the insurance industry still has much to consider before implementing anything concrete. However, considering its many benefits, blockchain technology will certainly be a disruptor in the industry. It’s just a matter of when. For more information on this topic, here are a few additional resources:
Harvard Business ReviewA brief history on blockchain by Vinay Gupta
Business VancouverImplementing Blockchain Technology: Understanding Smart Contracts