Insurers are ramping up blockchain initiatives
Insurance is catching up with banking and payments in its use of blockchain technology – and that’s good news for insurers and consumers.
Insurers are increasingly focusing on blockchain initiatives -with activity and blockchain investment accelerating – because the technology provides a ‘single version of the truth’.
In comparison to the banking industry whose main blockchain focus is frictionless commerce, Allianz Re blockchain expert, Oliver Volk, says the insurance industry is focusing on optimizing inefficient processes and using smart contracts.
Volk says: “There are several insurance industry use cases and proof of concepts which are completed or are underway.”
He adds: “Blockchain’s main benefits include providing a ‘single version of the truth’. All parties work with one blockchain standard, and use the same ledger to directly capture all relevant data.
“Also, they can automate legal documents by translating them into smart contracts to reduce administrative workloads and eliminate manual reconciliations. They can create a virtual record to provide an unchangeable history, and use blockchain’s decentralized storage to protect data against fraud and cyber-attacks.”
Internet of Things
Another potential blockchain insurance use case is the Internet of Things (IoT).
Accenture’s Di Nella says: “Combining blockchain, smart contracts with IoT will mean smart cars/buildings/ships, etc. or fitness tracking devices combined with smart insurance policies that trigger themselves automatically and in real time when an external event happens.
“This will traverse the entire value chain with claimant, insurer and reinsurers all seeing a ‘single version of the truth’ simultaneously. The value that would unlock in terms of bringing straight-through-processing into insurance, reducing fraud whilst streamlining the industry value chain, is enormous”.
Di Nella adds: “Blockchain and smart contracts would provide a mechanism to significantly reduce fraud. There is the potential for blockchain to underpin a ‘fraud utility’ in healthcare and life insurance, for example, which could be used specifically as an anti-fraud mechanism.”
Tim Coates, principal consultant at fintech firm Synechron, says blockchain’s automation and objectivity could be ideal for claims processing, particularly for low value, high-volume retail products such as phones and travel insurance.
Coates explains: “By leveraging smart contracts, insurance policy criteria could be assessed by trusted sources, and, if the claims meet the criteria, payment would be done automatically with a blockchain wallet. This allows the process to be timely and transparent, benefiting insurers, customers, asset providers, and regulators.
“Because blockchain creates an environment of trust, customers would enjoy timely, transparent claim assessment and service providers would benefit from their clients’ heightened trust and cost-savings by removing the human element and human error.”