Most insurers have started exploring the opportunities the blockchain can deliver to their business. With 81% of insurers globally familiar with the technology, some areas of focus are fraud prevention, the digital tracking of medical records, and developing smart contracts.
JC Oberholzer, chief systems architect of SilverBridge Holdings, examines the role this technology will play in making for a more secure and efficient way of doing business.
The numbers speak for themselves. More than 24 countries are investing in blockchain with in excess of 90 companies joining blockchain consortia. And venture capital-backed Bitcoin and blockchain fintech investment activity has grown from $3-million in 2011 to almost $500-million in recent years.
Even so, when talking about the blockchain, many people default to its part in the cryptocurrency market. However, the technology has the potential to disrupt any industry sector, leaving in its wake a more effective system way people get to own the value they create.
Currently, insurers struggle with the inefficient exchange of information, complex liability assessments when it comes to reinsurance, fragmented data sources, the use of a middleman, and a manual-driven claims review and process environment.
“The blockchain can change all that. Even when only used in the underwriting process, the blockchain can help reduce costs, improve risk assessments, and enhance client onboarding. It can also change the claims submission process from its registration through to assessment and payment. Having a simplified (and secure) environment to automate much of this, will radically reduce fraud and deliver a better customer experience,” notes Oberholzer.
Think of the blockchain as a more sophisticated way of recording information in a database. Once added to the database (the blockchain), the data cannot be removed or altered in any way. This essentially creates a verifiable, permanent record. Cryptocurrencies were of course the logical result of this new technology, but even so the influence of the blockchain extends so much further.
Two of the traditional challenges of the insurance industry – fraud and customer service – can be transformed with the blockchain. Because blockchain ensures records are not altered in any way and can be verified with complete accuracy, it provides significant opportunities for insurers to embrace the technology.
“Because data stored in the blockchain cannot be altered, it all but eliminates the potential for insurance fraud. No single element of the data can be modified in any way. And let us not forget the transactional capacity the technology unlocks. Suddenly, smart contracts become a reality where clients can digitally sign contracts directly with the insurer and claim pay outs can happen virtually instantaneously thanks to cutting out the middle-man.”
In Europe, the B3I Services AG was formed to streamline the development, testing, and commercialisation of blockchain solutions in insurance. One of its use cases highlighted how the blockchain can be used for fraud detection and prevention. This sees how the development of a blockchain network can provide a way for insurers to safely and securely share data to gain visibility into criminal patterns and prevent future financial losses.
From a consumer level, the blockchain can help insurers understand and price risks better. By allowing customer, risk, and policy information to be shared quickly and securely across multiple stakeholders in the insurance ecosystem, the revenue potential and growth prospects will improve by enabling insurers to price their products more accurately.
“Irrespective the use case, the blockchain provides insurers with an opportunity to grow in new, more innovative ways. However, they must act sooner rather than later if they are to keep up with the pace of change that has seen the growth of insurtechs in the market.
“Fortunately, the blockchain can scale effectively according to needs, so insurers can limit its roll out to best suit their business cases. With the blockchain, insurers not only get an immutable audit trail, but can do so faster, more securely, and efficiently than ever. And that is something that is critical for the connected customer today,” he concludes.