From better risk visibility & faster claims processing to collectively fighting fraud, blockchain can provide comprehensive benefits
Blockchain implementation can enormously accelerate insurance transformation and steer the industry towards digital collaboration and interoperability. Permissioned blockchains deployed in insurance consortia yield comprehensive industry benefits across the value chain in three categories: (1) preventing fraud, (2) championing interoperability in multi-party processes and (3) facilitating consumer trust and ease of auditing through data transparency and immutability.
Insurance is a multi-trillion dollar industry, but the workflow in brokering trust, insuring parties, and reinsuring risk items today remains an expensive, slow, and fraud-prone process.
Although the digital age has inevitably brought about technological innovations, the centuries-old insurance industry seems to still be heavily drowning in paperwork and redundant manual procedures. Layered with the required collaboration from a multitude of parties needed to execute certain industry tasks like enforcing policies, processing claims, underwriting contract items, or drawing up new contracts, the insurance process remains far from transparent, coordinated, or secure. Each new party engaged in a particular insurance transaction — be it insurer, reinsurer, broker, consumer, or vendor — adds a compounding set of paperwork and potential for fraud, cyber attack, lost data, misinterpretation, and human error.
Challenges arise in verifying this data without breaching trust, so auditing is a widely used process to ensure consistency and accuracy. But even still, trust is at an all-time low, according to a recent Edelman industry poll.
The current insurance industry landscape in a snapshot:
- The insurance industry is widely known to be slow in adopting technology, and is behind digitally. [Source]
- Legacy systems have perpetuated a closed-off insurance information environment with data silos and resulting operational inefficiencies. These gaps of knowledge between insurance stakeholders are exploitable.
- In terms of fraud and fraud prevention spending, the numbers are unfortunately astronomical. In addition, human error also finds its place wherever manual entry and paperwork is involved.
The Insurance Industry epitomizes a blockchain use case. Adoption of blockchain as a standard system of industry transaction can improve collaboration between market participants and streamline market operations — freeing up billions of dollars in capital otherwise spent on auditing & administrative costs, lost in fraud, or frozen in collateral as a result of low risk visibility.
Source/More: Insurance on the Blockchain – Fluree PBC – Medium