Innumerable applications of blockchain technology have emerged since it was first introduced as the underlying technology of the world first ever cryptocurrency Bitcoin. Blockchain has indeed proved to be a revolutionary object that has transformed the way transactions are carried around across the globe. The widely dotted technology has teamed up with various other fields of computer science like Artificial Intelligence, IoT, and robotics to provide efficient solutions to many of the problem in a wide range of fields from supply management to healthcare industry, and insurance industry is no stranger to blockchain technology either.
Before blockchain made an entry into the digital world and that of insurance, there were a number of problems that were difficult to solve which majorly involved fraudulent claims, third party payment transactions and inability to handle huge amounts of data. All that changed when blockchain was introduced and fintech was born. Big Data and related field like cloud computing came into existence and significantly cut down data storage issues. Blockchain with its power to provide security, trust, transparency, reliability and immutability has provided numerous solutions to the insurance industry.
The first and foremost being the security that blockchain bring to the transactions that are conducted on it. The transactions are peer to peer with no intrusion from any third party with malicious intent. This way, any data or information stored on the blockchain remains tamper proof and away from hackers and looters. Other than that there are multiple security protocols that are put in place to eliminate any chance of duplicating or stealing it from the distributed ledger. Additionally there are platforms that allow users to share selective information through which users can partially share their information.
The transactions that are conducted over blockchain from one entity to other hold authenticity. It also cuts down the administrative costs by maintaining records on the chain. Insurance companies can easily verify the claims by looking at the tamper proof records.
Data accumulation has become rather an arduous task because of exponential growth the industry has seen overtime. For the insurance companies to manage and handle this data with utmost diligence where it can’t be corrupted or stolen was quite the challenge. The problem is that with centralized systems the data is concentrated into the centralized authority, and if the central server is compromised, the whole system becomes vulnerable, whereas with a decentralized system the data is distributed across the network, all nodes are incharge of safeguarding their data. If anyone does tamper with the data the others get notified about it.
The smart contracts on ethereum have completely eliminated the need for legal contracts that reside on paper. Smart Contracts accumulate information through real time environment and use that information to make decisions and fire transactions upon the fulfillment of a condition. The transactions may be conducted to make payments, claims as well as reimbursements. This guarantees that both parties, the insurers and the customers, are not resorting to fraud.
There are a number of insurance companies that are looking to create products based on blockchain to ensure secure transaction between themselves and their clients, like Etherisc platform, for example, they have developed smart contract tools to create insurance policies on the Ethereum’s blockchain. The Institute’s RiskBlock Alliance, is another industry-led group that is making efforts to create blockchain-enabled solutions for real-world problems. The company, B3i also plans to leverage blockchain technology in the reinsurance sector, and then in commercial insurance.
In a nutshell, the utility of blockchain in general encompasses various industries. The use cases are exponentially increasing and the industry needs to keep up with the changing trends and incorporate smart solution in their insurance policies so as to provide their customers with a better products that are based on the blockchain technology.