There is an increased FOMO among insurance companies about blockchain technology. Even established insurance firms have started investing in blockchain app development to transform insurance processes. However, yet no one had heard of blockchain technology five to six years before. Only a few tech enthusiasts could have understood a digital ledger’s workings, let alone blockchain applications in the insurance industry.
But, things are changing rapidly. The buzz suggests that blockchain technology can optimize the market, establish trust, disrupt supply chains, and facilitate innovation mechanisms across the business. Additionally, evidence indicates that blockchain technology can enable increased productivity, growth, and competitive advantage across the financial services sector. Undeniably, It won’t be long before the insurance industry expedites to concentrate, spend, and implement blockchain technology.
Surely, insurers who neglect this new technology for advancing infrastructure may end up offering unappealing services. At Oodles, we think of the blockchain as a crucial digital development architecture. Indeed, it is one of the primary delivery innovations that facilitate new-age developments of other technologies like wearables, drones, and Internet-of-Things (IoT) connected devices, and more. It has overall the potential to underpin the sector’s growth. Let’s find out how.
Blockchain technology is finding use cases in nearly every business area. The most active innovators are emerging from financial services organizations. More than 40 financial services companies, including their strategic acquisition arms, have invested in a blockchain or associated start-up since early 2014. They have found applications across fields of finance like insurance and wealth management. The technology has got support from institutions like B3i and the Nimbrix consortium in the past. With significant activity in the government, healthcare, supply chain, and real estate markets, the real economy is also getting in on the act.
In the current ‘data-driven 4th industrial revolution,’ a few established insurers are eying on blockchain’s potential to accelerate their digital transformation objectives. These first and second movers have realized the importance of engaging in blockchain-powered networks of financial services. They see blockchain as a technology that, among other advantages, boosts performance, reduces transaction processing costs, improves user service, enhances data quality, increases trust between parties, and promotes auditability.
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As per a report by KPMG, AXA Strategic Investments (along with other partners) invested around US$55 million in a blockchain start-up. USAA invested around $75 million in digital currency exchange. Lloyd’s London Sector, as part of their target operating model’s modernization, has adopted blockchain technology.
Many other players are also exploring possible blockchain solutions in the insurance industry. The names include Allianz, AIA, New York Life, Mitsui Sumitomo Insurance Company (MSIG), Swiss Re, John Hancock, and Manulife Financial.
Also, based on the applications of blockchain in insurance, we can categorize them into two broad categories:
Blockchain insurance solutions for internal use cases do not require heavy reliance on a broad business network impact. They are suitable for increasing internal performance, for instance, by minimizing processing costs. Our experts at Oodles suggest that these blockchain initiatives can indeed produce considerable top-line sales growth. Past results of leading organizations indicate that the top-line growth by simplifying internal processes can surpass anticipated reductions in operating costs.
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These initiatives rely on network effects. They require a larger buy-in and support from a variety of cross-industry businesses. For instance, B3i is one of the most noticeable blockchain alliances, launched in October 2016 by Allianz, Aegon, Munich Re, Swiss Re, and Zurich.
Across a range of insurance industry activities and processes, stakeholders can explore blockchain applications and subsequently strengthen them.
Establish a blockchain-based travel insurance model of ‘pay as you go’ that offers instant payouts in the event of a delay or termination.
Create a transparent and streamlined course of claimants that drastically increases customer satisfaction.
Use blockchain technology as a single, secure and open archive to build, organize and preserve company documents.
Digitize and verify customer records and enhance security using blockchain-based identity solutions.
Simplify scope assurance and streamline the resolution of claims to increase operating performance and eliminate costs.
Encourage simplified claims induced by smart reinsurance contracts and templates to be automated.
Build a “golden stream” of security bond knowledge that is open to all members in real-time.
Build a peer-to-peer network without the need for an intermediary or administrator with smart contracts.
Policy as a smart sales deal, selling of oracles, customized premiums, insight into consumer experience for coverage optimization, and triggers for payouts are a few of the probable use cases with policy sales on a blockchain.
Smart contract oracles for accident alerts initiate avoidance and recovery workflows.
Smart contracts, oracles, and advanced underwriting enable automation of validation of claims and assessment of damages.
Faster data flows and claims validations provide crucial insights into reserve calculation that impact support operations.
Real-time data flow and assessment of claims provide quicker insights into reserve estimation affecting support processes.
Industry consortiums can use blockchain smart contracts to test retrocessions automatically.
Risk liability gets reduced along with automated payout of premiums and claims and multiple subscription models.
Inside the insurance agency, claims data is ineffectively exchanged with brokers and third parties, such as repair shops. Generally, processing requires extensive manual entry of data and replication through the value chain. It results in constant problems like human error and discrepancies due to data timeliness.
A smart contract can expedite the claim process by streamlining coverage verification and repair payment at approved repair shops. Further, using the coverage details stored on the blockchain smart contract, stakeholders can fill and adjudicate a claim in a secure, automated manner. It, thereby, eliminates conflicts and the need for further checks by claims adjusters. Additionally, it automates payments as well.
To conclude, the above information suggests that insurers should start planning for the disruptive effect of blockchain across insurance processes. Also, our blockchain development team builds market-leading prototypes that can scale, industrialize, and incorporate into the current company by integrating the skills of our keen technological developers with a broad ecosystem.