Use Cases of Blockchain Technology in the Insurance Industry

By Suffescom Solutions

July 14, 2022

Why use standard databases in your business when blockchain can offer immutable transactions. Blockchain, or "the internet of value," can send currency digitally using a private key to access the funds anywhere in the world without a central authority. Usually, the typical databases function by a central authority that makes your data vulnerable to a thousand threats, most importantly hackers. 

On the other hand, blockchain works by several nodes. While the regular databases spread like honey, the blockchain prevents the honeypot from hackers.

We at Suffescom Solutions excel in app development and provide numerous insurance services through blockchain technology in finance and insurance. Our highly-rated custom blockchain services are fully equipped to work on all of your insurance queries perfectly. 

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Introduction of Blockchain in Banking and insurance

Blockchain offers accountability to even small businesses and big enterprises due to its cost reduction that cuts out the intermediaries for financial services. Blockchain technology's decentralized and trustable structure can open up new possibilities and help businesses by enhancing security, traceability, and transparency. Companies are also worried about integrating blockchain technology, especially when spending a lot of money on research and development for a technology still regarded as "disruptive."

Before investing in complete development, modern enterprises can establish a proof-of-concept using Blockchain-in-a-Box starting kits to assess the potential and feasibility of blockchain in banking for their operations. Blockchain for insurance use cases helps the investors to support an actual project rather than an idea. Businesses may create an entirely tangible platform with the support of its Blockchain-in-a-Box starter kit, allowing them to stand out in their industry and inspire faith in their initiatives. 

Blockchain Technology In Finance: Birth Of Smart Contracts

Smart contracts enable blockchain users to transfer anything of value transparently without using an intermediary. Smart contracts, like physical contracts, specify the rules that two parties must follow. In contrast to material agreements, intelligent contracts can track insurance claims and hold both parties accountable.

Insurance policies code decentralized smart contracts in which an individual agrees to pay the insurance company some money in exchange for the company's promise to help cover the individual's future medical costs. Based on the records of an insurance policy owner, blockchain in insurance use cases like smart contracts will generate immutable data that will allow the company to accept or reject any insurance claims made to it immediately.

According to Magdalena Ramada-Sarasola, Ph.D. (InsurTech Innovation Leader EMEA, Willis Towers Watson), blockchain technology in finance can potentially disrupt the insurance industry in six ways. They are:

  • Brilliant contracts based on events
  • Improved back-end efficiency
  • Disintermediation
  • Improved pricing and risk evaluation 
  • New insurance offerings
  • Assisting the underserved

What are the Use Cases For Blockchain In Insurance?

Blockchain technology has many applications in the insurance industry and across many industries, including:

  • High-value item registries and warranties
  • Anti-money laundering (AML) and know-your-customer (KYC) procedures
  • Products based on metrics (indices)
  • Practices of reinsurance
  • Handling of Claims
  • Methods of distribution
  • P2P (peer-to-peer) models

Thus, blockchain in insurance use cases is numerous, as blockchain is not just a technology that limits itself to business in cryptocurrencies. The applications are relatively unmatched and redefined the insurance business. It is obvious that blockchain technology is quite beneficial for transparency in the industry and improves truthfulness in consensus algorithms. 

DISCUSSING SOME OF THE BLOCKCHAIN IN INSURANCE USE CASES  

MANAGING UNTAINTED AUDIT TRAILS

Insurance transactions are done by blockchain accounts, enabling increased automation and trustworthy audit trails. The smart contracts and decentralized applications offered by blockchain platforms like Ethereum will revolutionize the insurance industry.

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AUTOMATING TRANSPARENT TRANSACTIONS 

Transparent automation is highly beneficial in saving time, effort, and administrative costs through intelligent contracts. Smart contracts are programs stored on the blockchains that function when the determined condition meets the demand.

Funds are released through smart contracts to the significant parties, sending alerts, registering automobiles, or issuing tickets. With so many blockchains in insurance use cases, you cannot miss adopting the perfect blockchain technology to regain the momentum of work efficiency.

EFFECTIVE DETECTION OF FRAUD

When fraudulent information reaches a life or health insurer through false claims, falsified applications, or other channels, intelligent contracts can assist in determining whether the submission is valid. 

ESTIMATING NON-HEALTH INSURANCE FRAUDS

According to reports by the F.B.I., non-health insurance frauds in the U.S.A. value about forty billion dollars annually. Even today, many insurers use publicly available data from private companies to detect fraud. These data sets are incomplete due to some legal constraints gazing around and secretly sharing users' data and identifiable information. 

When insurance claims reach a blockchain-based ledger shared among insurance companies, they cannot alter due to the immutability of the blockchain, which can eventually reduce fraud.

Furthermore, blockchain in insurance use cases helps to simplify coordination among insurers. When insurers access the shared blockchain ledger, they can instantly determine whether or not a specific claim pays off. They can detect suspicious behavior quickly because they use the same historical claims data.

MANAGING CLAIMS IN DIFFERENT INDUSTRIES 

Through an innovative contracts system, large sums of money, counting in billions, can be saved. Insurance policies implemented as smart contracts on a blockchain execute pre-programmed claims processing actions, automating information transfers between insurers and other parties. Furthermore, payments distribute to policyholders on time. Now that all parties have access to the same information, disagreements are pretty unlikely.

AUTO INSURANCE 

Blockchain can do wonders in the automobile industry, where payouts reach the next level. Using blockchain, insurance companies will solve many of the problems that the car insurance industry is currently facing, thanks to blockchain technology. Insurers through blockchain in finance can track claims in unprecedented ways by using a shared trusted ledger.

For example, a car insurance company can track an insured customer's driving history and behavior and adjust their policies accordingly. If the corresponding driver is careless, they will be unable to claim eligibility for certain premiums or bonuses fraudulently.

Because information stays on a ledger, fraudulent claims will be virtually impossible.

EMERGING MARKET MICROINSURANCE

Micro-insurance schemes may sometimes appear invalid due to labor-intensive administrative processes and high fees for small payments.

However, with blockchain, we handle micro-insurance schemes in emerging markets that will automate based on defined rules.

HANDLING COMPLEX DATA DURING REINSURANCE

The concept here is that reinsurance offers insurance to insurance companies so that they don't fall off when multiple claims fall into its desk. This mishappening can be due to natural causes like earthquakes, floods, tornados, etc. 

Blockchain for insurance use cases helps data sharing between insurers and reinsurance companies can be complex. It is also time-consuming and requires duplicate manual labor. Blockchain can help insurers and reinsurers by streamlining processes and information flows.

To wrap up

Blockchain in insurance has the potential to be a game-changer. Blockchain has compelling use-cases and has the potential to digitally transform how physical assets manage, track and insure data.

It's time to take advantage of blockchain for incredible benefits and hire a dedicated blockchain developer from the talented team of Suffescom. The Blockchain services we provide will stay on the insurance roadmap for several years in the future. When digital substantiation is easier to incorporate into underwriting, we can anticipate unborn changes in other areas of pricing and product development. 

The correct combination of the Internet of Things( IoT) and Artificial Intelligence(A.I.) will lead to the robotization of insurance processes that will make our assiduity look veritably different in the future. 

Still, these new technologies bear proper due diligence before being thoroughly abused by the insurance assiduity. Even though it is still in its infancy, blockchain in insurance use cases is here to stay, given the market's willingness to embrace newer models and protocols.

It is essential to have rules and regulations that everyone agrees on and that all networks support. Every challenge is a beautiful opportunity. The question is, are you up for these challenges? Buckle up! Suffescom Solutions is there for your aid. Get in touch with our team to discuss blockchain technology in finance and the insurance sector. 

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