Blockchain Technology based on Distributed Ledger concept is being exploited by BFSI companies to increase efficiency and reduce cost. While Blockchain has found wonderful use cases for the Banking and Financial Services organization, experts have predicted that it is going ‘Disrupt’ the insurance industry in a true sense. No wonder 3 of the 15 largest VC FinTech deals of 2016 went to Blockchain start-ups.
So, let’s talk about how Blockchain is going to disrupt Insurance Industry’s eco-system:
ROLE OF INTERMEDIARIES
Intermediaries are important for Insurance sector eco-system. Traditionally known as insurance brokers or insurance agent, they facilitate the purchase of insurance by matching the various products offered by various insurers with the needs of the consumer.
For some type of insurances involving less complex coverages like Auto Insurance, the distributed ledger concept of Blockchain Technology can be utilized to offer decentralized consortium network of insurance carriers. This consortium would manage all its transactions. Disintermediation will significantly impact the end price of insurance products and would offer structural transformation to the Insurance Industry.
SMART CONTRACTS TO AUTOMATE CLAIM SETTLEMENT PROCESS
Another feature of Blockchain Technology, Smart Contract, is a pre-written computer code/logic that is stored in a distributed database of a Blockchain network, which gets automatically executed in case of occurrence of an event/trigger. (Read more about Smart Contracts)
Smart Contracts can automatically deliver claims payout to the customer when a predetermined condition is verified by an external data source (trigger). The insurance claims can be verified by claim agents and can be recorded on the Blockchain in real-time to trigger settlement of specific Smart Contract. Smart Contact powered automation can significantly reduce the time of settlement and streamline the overall process. In some use cases like delayed flights insurance, the manual process of claim verification can also be done away with. A code on Blockchain will check the airline registry database and if the flight is delayed with other pre-conditions met, the claim smart contract will be triggered to settle the payments.
BETTER REACH TO LOW-INCOME GROUP
Microinsurance was designed for the protection of low-income people (below $4 per day). However, due to lack of reliable data and identification document, huge acquisition and administration cost involved with low customer loyalty and policy cancellation, microinsurance products never achieved the success that they could have. With a Blockchain-based mobile app, which utilizes smart contracts, these issues can be addressed. These customers would be able to buy policies via mobile app and get services including claim settlement.
BLOCKCHAIN WITH IOT, BIG DATA, HEALTH TRACKERS FOR BETTER RISK ASSESSMENT
More the data, better the risk assessment! Blockchain Technology can be integrated with health trackers and IoT devices, combined with Big Data, can offer better risk assessment than the traditional ways offered by medical underwriters.IoT, Big Data, and Health Trackers process the type and quantity of data which human medical underwriters can’t do and hence can provide better information for risk assessment.
In summary, the application of Blockchain in Insurance Industry is based on its three major attributes – Decentralized, Incorruptible and Secure. Automated identity validation across the Blockchain Network can significantly reduce the time and cost of providing the service. It would allow every insurer in the network to boost operational efficiency.
Sofocle Technology, a Blockchain start-up, is committed to developing Blockchain based products and solutions. With a talented pool of consultants and engineers, we have expertise in developing Blockchain solutions based on Smart Contracts. To know more about howSmart Contracts and Blockchain can be utilized in Claim Settlement and overall Insurance Process, please contact Sofocle at [email protected] or visit https://www.sofocle.com/contact-us/