Blockchain technology might offhandedly be associated with cryptocurrency. However, as a decentralized digital record keeper, blockchain technology has the potential to revolutionize the insurance industry, spanning several markets with a handful of applications.
Blockchain Technology and the Insurance Industry
Blockchain technology is poised to change the insurance industry’s future, primarily as it relates to smart contracts and claims processing.
Reduced Administration Costs
In the health insurance industry alone, administrative services account for up to 30% of annual costs. Administrative waste is a critical burden across the insurance industry.
Companies using blockchain technology can reduce overhead costs, customer service delays, and customer turnover by offering controlled access via self-executing programs.
What this looks like:
A client sets up a smart blockchain contract to execute a payout on a claim meeting key parameters. Personnel aren’t required to the same extent to complete the contract or follow up with self-executing programs.
How this helps reduce administration:
Now, insurance companies don’t need to staff as many adjusters or administrative personnel to field phone calls, emails, and facilitate visits to confirm a valid claim.
Faster Claims Processing
Insurance claims processing can take anywhere from a few days to several months to process, depending on the complexity of the claim. For example, Progressive says the average wait time for most types of car insurance claims is several weeks.
Contracts between insurers and insured could be stored on a blockchain with specific transactions programmed to execute automatically after parameters have been met.
What this looks like:
In the event of a travel delay, damage to a primary residence, or a car accident, insurance automatically refunds a client who submits a digital claim.
How this helps improve claims processing:
Clients don’t need to wait to receive a payout several weeks or months after the fact.
Fraud Management
According to the FBI, insurance fraud costs $40 billion per year, not including health insurance claims. This significantly harms insurance overhead and necessitates increased security measures and personnel to monitor for fraudulent activity.
What this looks like:
Blockchain technology could be used to set up a digital history related to fraud data shared over a network between insurers.
How this helps with security:
Confidential and anonymous, insurance providers can, for example, review a database of insurance claims for any history of fraud associated with individual clients or companies.
The Future of Blockchain Platforms: How to Safely Share Data
Blockchain platforms are enabling the insurance industry to safely collect, store, and share data. a blockchain functions as a shared database that stores information via cryptography. These platforms are most commonly used as a ledger, and they are decentralized, which means there’s not a single group or individual in control, but rather all users can control a given blockchain. This has the potential to allow several forms of information to be stored on the same blockchain in a digital fashion and accessed by those who need it.
The health insurance industry is relying on blockchain platforms to improve security and accuracy for medical data, which can be stored and accessed by several healthcare providers and customers in a confidential and secured environment.
Medicalchain
Medicalchain has begun integrating a blockchain-based platform to store and share medical records in a confidential space accessible across any network. Such steps are pivotal in:
● Reducing overhead administrative costs and administrative waste,
● Making it easier for customers to submit claims,
● Enabling the tracking of essential medical information,
● Sharing data across several health care providers.
BCBS
Blue Cross Blue Shield (BCBS) has already begun implementing digital solutions via blockchain technology with a separate partnership via Coalesce Health Alliance. The company has begun streamlining data exchanges among BCBS partners with confidential blockchain technology.
The Future of Blockchain Contracts: Streamlining Claims
In addition to securely storing data, blockchain technology in the form of smart contracts is helping to streamline the claims process, particularly where car insurance and homeowners insurance are concerned.
Smart contracts are self-executing, which means they can be programmed to initiate specific actions based on the fulfillment of predefined conditions.
Where insurance companies are concerned, smart contracts can reduce the cost and time associated with processing claims by automating the claims process. For example, in the event of a car accident, a smart contract could automatically process the rate of refund on a claim and release it to the policyholder once predefined parameters have taken place.
A blockchain has the potential to store information like:
● Photos
● Police reports
● Accident reports
● Receipts
● Inventory lists
Once stored on the blockchain, set information can be shared with approved parties, reducing fraud by verifying authenticity, and expediting the amount of time it takes to access information and settle a claim.
Insurwave has begun integrating a blockchain platform for its claims process with great success.
The Way of the Future
Overall, blockchain technology gives clients control over their insurance data and provides a centralized location that is not owned by a single insurance provider or company. This offers opportunities to safely and securely store data. Tangentially, smart contracts can function in conjunction with blockchain platforms to enable self-executing contracts that expedite the claims process.
Capitalizing on this new technology will transform the insurance industry by reducing administrative costs, providing faster claims processing times, and increasing security and fraud management.
