The World Economic Forum published a report entitled, “Deep Shift – Technology Tipping Points and Societal Impact”. By 2025, 58% of these experts and executives believed we would hit the tipping point for Bitcoin and Blockchain. This was defined as – “10% of global gross domestic product will be stored on Blockchain technology”. Blockchain has the potential to improve the way insurers’ record risk, increasing the speed, accuracy and transparency of our processes. Blockchain offers a decentralized register of ownership by recording every transaction in the system, from creation of a block and through any number of transfers made. Every computer tapped into the system stores a copy of this Blockchain, and before a transaction can be made the system checks that their version of the Blockchain is in sync with all other versions in the network.
The potential applications of Blockchain technology stretch from wealth to health. Financial institutions, including Barclays and Allianz, are now considering how this technology could revolutionize financial services by tracking assets, automating processes and recording the transfer of value.
Blockchain use cases for Insurance
- Smart Insurance Contract – Smart contracts powered by a Blockchain could provide customers and insurers with the means to manage claims in a transparent, responsive and irrefutable manner. Imagine an insurance policy where claims are paid automatically as soon as a loss occurs and without the need for a claims assessor. Contracts and claims could be recorded onto a Blockchain and validated by the network, ensuring only valid claims are paid. Insurance companies spend over several billions each year on fraud and compliance. There is tremendous use of Blockchain to improve the claims process. Claims-handling could become more efficient and streamlined, resulting in an improved customer experience.
- Counter Fraud – Fraud is a very real problem for insurance companies. High value assets can be fraudulently registered as stolen, insurance companies pay out, and then the asset registered with a new insurer for the process to be repeated. By using Blockchain to create a decentralized ownership ledger for these high value assets, registered using certificate number and laser inscribed ID number on the diamond itself, it will be possible to recover these items once they resurface.
- Online digital deal-rooms that could considerably modify the way business are conducted globally. Digital deal rooms will define how documents can be securely shared and logged. A Blockchain-based deal-room would strip out the need to trust an intermediary while providing an accurate record of the documents shared by the deal’s participants. It gives you a database that’s unalterable and nobody owns. It’s a ledger of who sent what to whom, when, forever. That’s an important part [of the insurance process
- Piracy prevention of Digital Assets – Piracy can also be combatted by tracking ownership of digital assets. Current DRM technology often requires that a song you purchased from iTunes can only be played through an Apple device. By using a decentralized ledger for ownership of digital content the ownership of digital assets can be authenticated across platforms, and can be transferred securely to new parties when sold.
- Peer to Peer insurance – Blockchain will also give rise to P2P insurance in which policyholders’ pool together, based on a sharing economy concept, and support each other financially in the event of any claim. But instead of a policy managed by people who process applications for new policies and applicants for new claims, the peer-to-peer insurance would only be managed by smart contract code, significantly reducing costs and expediting pay-out thereby significantly increase policyholder experience. Additionally, Lower operating costs are the biggest beneficiary for insurers.
The possibilities are endless and it is for the insurance companies to invest, explore and experiment with the different use cases. The regulatory compliance will also be a considerate issue which will get addressed in coming years.