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Buying insurance is a way of guarding yourself and your family against the unexpected. However, customer satisfaction has declined. Mostly this is because of higher premiums combined with delays in benefit dispensation. For insurers, fraud remains a major concern.
As insurance companies seek a way out, blockchain technology offers solutions. For example, it could transform areas such as claims settlement and client onboarding. It can even aid with fraud detection and risk management.
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#1 Client Onboarding
Insurers need to satisfy compliance needs such as know your customer, or KYC. Therefore, providers need to collect, verify, and validate certain documents. For instance, they need to verify details such as birth date, name, and so forth. Delays and errors lead insurers to spend vast resources for reconciling records. Blockchain networks could be a solution to this conundrum.
That’s because insurers could verify customer identities using secure blockchain technology. As a result, insurers would no longer need to go to multiple sources.
For policyholders, on the other hand, making a claim is a confusing process. But distributed blockchain networks can allow policyholders access to the data they need. This would reduce policy holders’ anxiety about making claims. At the same time, it would reduce insurers’ administrative duties.
In short, blockchain can give both policyholders and insurers the same information about events and insured goods. Consequently, this will make claims processing easier.
Through the process of underwriting, insurers evaluate the risk of furnishing a client with a policy. Moreover, they can gauge the extent of coverage a client should receive, as well as how much each client should pay for their coverage.
Insurance is risky, but bitcoin technology can make it easy to check if the odds are favorable. Using blockchain, insurers can decrease their risk liability by means of external data and semi-automatic pricing. This automates and shortens the underwriting process. It also reduces operational costs.
Blockchains have also improved trust in the underwriting process through shared programs. The first multinational insurance policy using smart contracts and blockchains was put together by IBM, Standard Chartered, and AIG in 2017. This policy permitted visibility into the underwriting coverage as well as premiums. What’s more, it did so at both the master and the local levels.
#3 Insurance Fraud Detection
The premise behind blockchain’s application in insurance is to share information easily. It also provides line-of-sight data and security. That’s because information recorded into blockchain cannot be changed.
Underwriting, onboarding, and claims settlement are error-prone sectors of the insurance industry. However, they are not the only insurance sectors where blockchain can help.
For example, blockchain has been growing as a repository for data and transparency of information. This creates a sense of trust. Therefore, it can help to detect insurance frauds. Plus, it is invaluable for risk management.
Because of its ability to provide public ledgers across multiple parties, blockchain technology eliminates errors and detects fraud. Decentralized digital repositories powered by blockchain technology can verify the authenticity of clients, transactions, and policies. They do this by providing a complete historical record. Insurers have even been able to identify duplicate transactions or suspicious activities by using blockchain.
Blockchain Can Reduce Risk
First-moving insurers are exploring blockchains to reduce risks and frauds associated with cross-border payments or multiple currency transactions. In the specialty insurance and reinsurance markets, blockchain technology can fill in the gaps and improve data quality.
Regulators and health insurers in the US also see blockchain as a powerful tool for preventing fraud. Blockchain technology ensures efficiency, transparency, and customer-focused claims based on higher levels of trust. Fresh data streams can enhance risk-selection processes. They do so by combining external risks, location, and analytics. With greater automation comes more efficient data sharing and stronger protection against fraud, as bitcoin technology redefines the insurance industry.
About the Author
This article was contributed by the CEO of Blackmore Group, Phillip Nunn. Entrepreneur, financial expert, corporate evangelist, fintech and crypto trading authority, Phillip is an industry speaker and renowned thought leader on topics such as fintech, ICO cryptocurrency, and blockchain technologies.