Blockchain can be used for claims, administration, underwriting, and product development, and right now, most of the ways that blockchain is being used are focused on ways to cut costs. One of the first things insurance companies are looking at is how to use blockchain to automatically pay claims. The Internet of Things (IoT) and Artificial Intelligence (AI) will work together to create an automatic insurance process that will make the insurance industry look like something from the future. The blockchain could also be used to send any kind of digital proof for underwriting, such as electronic health records (EHR).
Blockchain development services help insurance companies be more open, save money, pay out claims faster, be more efficient, and stop fraud. Blockchains can also help make new ways of doing insurance more profitable for customers.
Insurance companies work in a very competitive market where both individual and business customers expect the best value for their money and a great online experience. The insurance industry is changing and getting better because of blockchain technology.
Why should insurance companies start making a road map and strategy for digital blockchain?
Without Blockchain as a layer, digital models can’t be made in full. Blockchain is made to make it easier for all stakeholders to govern, keep track of data, and talk to each other. Smart contracts on the Blockchain make it easier for underwriters, third parties, consultants, validators, and customers to work together.
The insurance business is focused on people, which makes business operations and communication less effective. The first big impact of blockchain in insurance will come from projects that involve all stakeholders and cover the entire enterprise value chain. It could find the right use cases to build proprietary systems, cut costs, and improve the efficiency of big insurance companies at the same time.
Here are some important aspects of insurance that Blockchain technology can improve and help stop from being inefficient.
Finding and Stopping Fraud
Fraud is getting worse every year, and about 5 to 10 percent of all insurance claims are false every year. Some known car insurance scams are “ditching,” “double dipping,” and “cash for crash.” Identity theft is when someone gets and uses someone else’s information without their permission. This is another way to get things that don’t belong to you. To stop fraud, the limits of client-server architecture can be removed with blockchain. With the help of IoT and AI-ML solutions, Blockchain can track the endpoints of vehicle health insurance, which can give accurate data points for figuring out costs.
All parties can see what is going on in a blockchain transaction, and it is hard to change original declarations, policies, and contracts. Also, blockchain can make it much harder to fake things, change contracts or documents, and make more than one reservation. Blockchain makes it impossible to change or manipulate data in any way. If someone tries to get into the data, everyone will know about it. It’s almost impossible to delete data because it’s stored on multiple servers, called “nodes,” that are locked with encrypted keys. This adds a layer of protection against cyber threats.
Paying out Claims Faster
Processing an insurance claim can be very boring, time-consuming, inefficient, and prone to mistakes, especially when verification is done through paperwork. Also, there isn’t enough transparency in the way claims are submitted, and delays and mistakes can happen in the way they are processed, which leads to bad customer service. Insurance claims are a process that involves the insurer, the person being insured, regulators, and middlemen. Most of the time, they are marked by inefficiency and bad intentions.
Blockchain can make the time it takes to make a claim, acknowledge it, and process it much faster and easier. During the stages of processing an insurance claim, blockchain can be used to create information that can’t be changed and can be checked by all parties.
Less Influence of Intermediaries
There are middlemen in insurance companies for good reasons, like getting claim information or preparing documents and signing up on behalf of the claimant. Still, their presence slows down the process and adds costs for everyone involved. The blockchain architecture gets rid of all middlemen by giving each company a copy of the original ledger.
It is impossible to get rid of middlemen because insurance will always need to be driven by people. But the whole process can be explained by combining IoT and AI/ML to cover endpoints (vehicle damage, service centers, hospitals, factories). When the endpoints are connected and managed through blockchain governance, overclaims, repeated work, and extra work are mostly kept in check. IoT-Blockchain and sometimes AI and ML integration make it possible for all stakeholders’ endpoints to connect with each other.
Also Read Here: Use Cases of Blockchain Technology in the Insurance Industry
There are many flaws in the way insurance works that bad people can use to their advantage. This is because the same device was used to make multiple policies and fake ID numbers. Insurers use public data and sign up for service providers to get updates on how fraud is being investigated and how it can be stopped. When sharing intelligence, insurers run into problems with business, technology, and the law because of policies on privacy and access control. Subrogation is done by hand now, but insurers can use blockchain smart contracts to automate the processes of loss investigation, claim notification, and recovery from different insurers and reinsurers.
When you use blockchain to track data across the value chain, you can improve accountability, data security, and the fact that data can’t be changed. In a blockchain, data can’t be changed. Codified smart contracts will be used to make sure that the insurance contract is fair. Inside the block, customers will be able to look at their credit history, IDs, government records, and policy documents. In the same way, blockchain can be used to store insurance premium payment records and other files that other insurance companies can quickly and accurately access and use.
It lets insurance companies think about the risk of giving a policy to a client, how much coverage the client should have, and how much the client should pay for it. Insurance might work like a gamble, but the insurance company will never play without looking at the numbers and making sure the odds are good. It can take anywhere from a few months to a year to figure out if a large company policy is worth the risk or not.
External data can be added to the blockchain to reduce risk liability and provide semi-automatic costs. This can help automate the underwriting process and shorten it, reducing the cost of operations. Blockchains also focus on transparency and building trust in the underwriting process by making it possible for complex multinational collaborations to be seen by everyone involved.
Data Entry and Identification
More than 16% of the people in the world have no proof that they exist. Because of this, there needs to be a way to identify people online. There are a lot of ways to accurately and electronically recognise people for who they are and confirm their qualities. When it comes to insurance, storing false and unreliable information can have very bad effects and help fraud spread.
Auditing is done by insurers, reinsurers, and brokers to get to know their customers and stop money laundering. It usually involves multiple groups, such as individuals and legal staff. If an insured deals with a broker who works with multiple underwriters, and those underwriters then negotiate with insurance brokers, there will be a lot of people interested in the transaction, and they will all have to go through the KYC/AML processes. This layering of procedures adds to the cost and time of processing. The distributed ledger technology lets multiple participants add, verify, and swap KYC and AML documentation. This cuts down on processing time and costs, makes time-sensitive transactions uninsured, and lowers operational risk.
Can big Insurance Policies also be changed by Blockchain?
Even though there are a lot of problems with insurance, it is a way to reduce financial risk and get paid back if something bad happens or you lose property. But here are the main types of insurance that modern companies offer and how blockchain can be used to make them better.
Due to the high number of car accidents and the deaths and injuries they cause, it is important to have car insurance. In 2020, 2.35 million people died on the roads every year. The financial effects are huge, costing over $300 billion a year. They include travel delays, damage to property, medical bills and stress, legal fees, lost productivity, and a lower quality of life. Auto insurance companies have come up with discount programmes and improved business standards to make their services more efficient and make their customers happier, and to lower the risk of losing money. Usage-Based Insurance (UBI) is being created and put into place, which means that drivers will have to pay different premiums based on how they use their vehicles. This is to reward good or other driving habits. UBI allows users to use onboard and telematics tools to record information like G-force, speed, mileage, time, location, and trip length, and then send that information to their insurance companies. Telematics data can be used to add to the blockchain. A camera-based AI/ML-based system can figure out the damaged vehicle and how much it will cost from a distance. Contracts on the blockchain can cover legally binding insurance contracts, so approvals can happen automatically.
The hardest part of life insurance is that the policyholder’s heirs have to send in papers like a death certificate. The policy papers can be accessed and stored in the block if the municipal corporations are stakeholders in the blockchain. In the same way, all government information, policy information, and IDs can be added to the blockchain. An API interface can be used to get information.
The life insurance industry can use blockchain to make sure that data is correct, safe, and trustworthy. And to make sure that information is share between two or more parties in a clear way. Instead of using paper contracts and agreements, smart contracts can be set up to activate and respond to all the agreements that have already been made.
Blockchain can help all kinds of insurance save money on their final costs.
Blockchain makes it possible for large and medium-sized businesses to improve their data security, traceability of information, and communication layer by giving them a better way to run their business. Blockchain makes it easier for stakeholders to trust each other and work together. It also changes the behavior of stakeholders, both internal and external, because they know that all data is safe and shared in a way that is hard to change. Indirectly, it helps insurance companies run their businesses more efficiently and give faster service, which saves money.