Blockchain in insurance sector
Blockchain is a huge distributed ledger technology that is widely being adopted for implementation in various fields of work. Presently, a lot of applications of blockchain have been identified in the financial and banking industry. This is because blockchain has long-term horizons, which, if explored to their core can reshape the world economy from head-to-toe.
How can we infuse blockchain into the insurance sector?
In the banking industry, blockchain finds is application in almost every section, ranging from customer-facing payment technology to trading and exchange services. Yet, the insurance sector lags behind technologically. But inculcation of blockchain technology may bring about positive changes such as relatively lower customer engagement, digital backdrops and limited expansion.
Blockchain will have a 3-way impact on the insurance sector:
- Unveiling new opportunities of products and services
Since blockchain offers an effective peer-to-peer network, a widely distributed and reliable ledger for storage of consumer information and smart contracts, it has the potential to take the insurance sector to new heights.
How this being put into practice is again a three-dimensional procedure:
- Attracting customers and eliminating from their minds, the fear of losing of losing their personal data. As in case of blockchain, personal data of a user will be stored on the customer’s personal device and retrieved only for validation.
- Blockchains, with a feature of efficient modelling of P2P and smart contracts, can be effectively applied to an insurance environment at low handling costs because of availability of automated reliable resources.
- Further, if we look up to a more technologically advanced asset of blockchain technology, we have Internet of Things. This technology will enable every device to register and administer its insurance policy itself through smart contracts. It will automatically detect damage, set off for repair and request for claim from the policy.
- Elevation of competence
Some 5-10% of the claims made by policy modellers are fake or fraudulent. However, blockchain technology can used to validate the personal details of consumers and policy matters, tally up with police’s report of any theft or fraud in the history and confirm purchase details of sanctioned policy.
- Slashing down costs due to autonomous nature
Blockchain cuts down cost by creating an automated verification platform for authentication of identity of policyholders and validation of contract, register data from third parties, and check for payouts of claims.
Shortcomings of blockchain
There are certain areas of insurance sector where blockchain can’t spread its pace. Some of them are:
- Scalability(model or function that describes its capability to cope and perform under an increased or expanding workload) is a challenge because of the infinitely growing size of blockchain and repeated replication of data for solidarity-based validation of data.
- Security remains an issue as compared to the traditional accountancy systems.
- Lack of standardization leads to springing up of risks to take investment related decisions.
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Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.