Insurance industry startups and established companies are looking at the potential benefits of blockchain closely. Although the policies they provide have been around for centuries, this technological innovation looks to bring everyone closer to a modern approach for wealth protections.
Many customers still call an insurance broker to purchase a new policy. Some even go to their representative’s physical office to sign paperwork. Because this industry is heavily administrative, the payments and claims are subject to human supervision.
Going to the blockchain could automate many of the functions that currently receive manual oversight.
Benefits of Using Blockchain in the Insurance Industry
The insurance industry could gain several advantages almost immediately if it were to implement blockchain technologies throughout each cycle. Here are the areas that would achieve the most benefits right away.
1. Streamlined Services
According to Deltec Bank, “Blockchain helps the insurance industry streamline several services. It would be faster and easier to go through the claims process, finish underwriting, or approach reinsurance with this technology.” With fewer people and agencies involved in each cycle, the operations have fewer delays. Smart contracts would even trigger events automatically without the need for manual oversight.
2. Better Security
The insurance industry would experience a higher level of security with blockchain. This technology would eliminate the need for single-entity control over data flows. Instead of using centralized servers that are vulnerable to hacking incidents, a P2P distributed network would make it challenging for the personal information of consumers to be compromised. Providers could also avoid the worry of hardware crashes.
3. Lower Costs
Smart contracts would provide more than automation benefits for the insurance industry. This component of blockchain technology would also reduce the number of errors that occur. Since 2+ parties can enter into a transaction because of the trustless structure with certain guarantees, the cost of a premium could drop since the work would be faster and with fewer mistakes.
If a 25% reduction in fraud occurred with implementation, then it could save $10 billion per year. That means the average family in the United States could save about $125 per year on their policy costs.
4. Improved Data Storage
Blockchain provides immutable proof of a transaction for all of the parties involved with it. The information becomes more reliable because of this benefit. Industry providers can access data stores more readily and securely, which means there would be more access to real-time analysis, KPIs, and statistics to improve operations. This advantage could reduce perceptions of risk for some consumers so that their policies are an accurate reflection of need.
Challenges for the Insurance Industry to Consider
Blockchain technology is not going to become the backbone of the insurance industry overnight. There are significant legal and regulatory issues to manage before anything can happen on more than a regional scale.
The insurance industry has yet to embrace the Cloud fully. It will likely experience the same attitude when approaching blockchain. The agencies that are the most willing to adopt this approach to coverage will be the ones that will experience the highest levels of future success.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.