The insurance sector has a scope of immense transformation with the advent of blockchain technology. It will provide far-reaching benefits for insurance companies in terms of reduced costs and consumers by drastically reducing the service time.
Following are some of the areas where the insurance industry will be impacted by blockchain:
Lets be blunt about it. How many of you ever read your insurance agreement in full? If you are like me, the answer is simple. Never!
In most cases, we have the highlight of the insurance policy told to us by the agent. And we run to them in case of claim. Then comes the hard part, where it takes a lot of paperwork, a series of verification and patience for one to successfully go through the claim process. Well, a smart contract is going to change all that.
To begin with, insurance agreement can be added on the blockchain which include information like terms and condition, the insurance company, the identity of insurer, premium, etc. Due to immutability, transparency of agreement will never be compromised once recorded on the blockchain.
Secondly, a smart contract gets triggered on meeting the criteria agreed between the insurance company and insurer, removing any need for arbitration. With blockchain, the paperwork involved in the claim process will become a thing of the past. Claim verification will be done through consensus by network nodes and once verified the payment is released.
On top of all, blockchain can enable a mechanism where the claim process can be initiated by a third party, not necessarily by the nominee. For instance, in case of life insurance, the claim can be raised by the hospital, which is added as a node on the blockchain network beforehand.
Know Your Customer (KYC) data
Currently, most of the service providers, like banks, insurance agencies, internet service provider, etc., has made information about the customer mandatory in the form of KYC documents. Customer provides this information separately since there is no sharing of data among them. Therefore, this leads to redundancy and the risk of data being leaked or stolen.
On the other hand, it is resource and time intensive for companies to go through the process. Blockchain will transform this. As a starting point, customers can initiate the addition of KYC information on the blockchain using an encryption key. Once it’s verified by nodes, consensus will be reached, and it will be added as a new block on the blockchain. That’s it!
Now, whenever KYC information is requested, the customer can share the public keys with the companies. In the context of insurance, this means the customer can choose to take policies from multiple insurance companies, without going through the KYC process again. Likewise, it will be hassle-free to transfer policies from one insurance provider to another.
Frauds are rampant in the insurance sector. Claims based on false documents, multiple and fraudulent claims are all commonly faced issues by instance companies. Blockchain eliminates multiple claim issues as a virtue of its inherent nature of being immutable. A claim (block on blockchain) once initiated can not be initiated, else it will be detected by blockchain network.
Other involved parties like hospitals, police stations, government agencies, etc. can be made part of the blockchain network and thus can validate the authenticity of the claim. Upon claim initiation, this can automatically be taken care of by a smart contract to prevent false claims.