Blockchain technology is defined as a bundle of a comprehensive time-stamped data record that is not managed by a single entity but spread across thousands of computers around the world. It has already established itself as one of the essential factors that will affect the way insurance works for various companies and in this article, we analyse those factors.
What is blockchain?
In simpler terms, Blockchain is a digital log that allows people to conduct transactions among each other without depending on a third party to verify the transfers. Cryptocurrency, the name of the currency in which you can deal with in a blockchain and is a crucial factor to run the blockchains. Anyone can see the information, and the system is extremely transparent with each entity answerable for their processes. It is considered relatively safe as well because it’s has cryptographic principles applied.
General impacts of blockchain
Blockchain has changed the way business is being conducted, just in the past 18 months, 450+ new blockchain related industries have been established in the United States.
Some of the immediate impacts are for third party certificates because it allows manufacturers to keep track of all their supplies and monitor the procedures to analyse the proper standardisation. It also allows new businesses to deal directly with the prospective clients instead of having to use the back to the grid redistribution. For people who work remotely, it will enable them to do the job and get paid directly instead of going through longish processes.
Blockchain is also already impacting the insurance industry, and companies are developing blockchain based solutions for insurance which will have significant implications.
How blockchain entered the insurance industry
It did not take long for people to realise that blockchain has more benefits than just providing an alternative currency. The source code has allowed developers to come up with new chains that can help with any transaction.
At the initial stage, it was evident that blockchain helps in identifying if various terms and conditions regarding transactions have been met, but it took some time to finally make sure that companies can store their laws and regulations online and that led to the creation of smart contracts.
This means, in future, there will be less dependency on lawyers and third parties to get the jobs done and verify the payments. For sure, they will have some role to play, especially when it comes to taking advice or discussing any issues but with regards to contracts and obligations, seems they will have a limited part to play.
In hindsight, it’s too early to talk about the impacts and taking over the legal industry, but for sure there are several impacts of blockchain on the insurance industry.
How will it affect the insurance industry?
The insurance industry is full of a middleman such as insurance broker or agent, and many companies provide several policies for people to choose from, which is an arduous task. Therefore, the insurance procedure can be significantly impacted by streamlining the ways and getting rid of agents, brokers, lawyers and claimers.
Quotation
People will have the ease of uploading all their information online by going through the verification process through blockchain which means you get rid of the agitation that is caused every time an insurance company deals with you and takes days to verify your data for providing quotes. Once the information is there, you can get instant quotes by saving time.
Faster Claims
If you are protected against something according to your insurance, then it will become straightforward to verify that incident and the clauses since all the data is accessible in real time and will be authorised so there won’t be any complications.
Fraud Detection
People lose around $40 billion in terms of insurance frauds. By moving everything in the blockchain, you will automate the procedures which mean there will be less or no chances of any fraud because there is no third person involved and you can trust the policies provided.
P&C and health Insurances
A shared record and laws that are executed through blockchain helps to improve the property and casualty insurance and to change the way things are done. Because it takes a lot of time to close the deals but having smart contracts can reduce the times and problems massively. Thanks to blockchain technology you can keep your medical records online and share them with the medical services providers.
Risk Assessment
You can get incentives from insurance companies if you take steps that reduce the risk for your company. All the actions will be recorded online which means you won’t require to go through the rigorous risk assessments again and again.
Personalised Policies
Your profile is present online, all the data is already there and verified this makes it a lot easier or insurance providers to check your information, know where you are coming from and then provide you with better, premium but more personalised offers that suit your requirements.
Reinsurance
By simplifying the processes and smart contracts can help with the flow of information and allow timely payments between the lender and the customer. Also, you don’t have chances of missing out on the contract as you can sign and regulate them through blockchain technology.
What the future holds?
There are exciting changes taking place in the insurance industry thanks to blockchain and a couple of examples are shared below.
Recently, French Insurance Company AXA has introduced smart insurance that pays people if their flight gets delayed for a specific time. The flight details are linked with blockchain and trigger the terms immediately, and cash is paid without filing a claim.
Similarly, a Singapore blockchain company AIX will soon introduce insurance for the Internet of Things for devices such as phones and drones since they are already linked.
Conclusion
Blockchain technology is still new, so it will take some time before it takes control of the processes around the world, but the signs are positive. There may be some drawbacks along the way, but things are moving in the right direction for blockchain impacted insurances.
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