How Blockchain Can Transform the Insurance Industry?

Of- Sanil Basutkar, co-founder at HealthySure

While the cryptocurrency industry today may be seeing a downward trend in prices
and demand, the underlying blockchain technologies still have untapped potential and
has applications across various industries. Blockchains have certain unique elements such as
can especially change the way financial institutions operate. The insurance industry
also, who have traditionally been a slower adopter of digital disruption can benefit
these functions. Of the many functions of blockchains, the following in particular are very
critical for blockchain applications in insurance.

Immutability – Immutability is the ability of data not to be tampered with. Immutable
transactions make it impossible for any entity to tamper, manipulate or change data stored on the blockchain network. Blockchain data and transactions can be considered immutable.

Decentralized – Blockchains are generally decentralized and do not need a governing authority. There is no central authority that maintains the network, but it is distributed between
the network user nodes. Decentralized cloud storage is also a fraction of the cost of
centralized cloud storage.

Safety – Blockchain transactions may also involve cryptography to secure information.
Information can be converted into alphanumeric values ​​using mathematical algorithms. These are called hashes and act as a unique identifier for all data. All the blocks in the chain come with their own unique hash and contain the hash from the previous block. So tampering with the data would mean changing all the hash IDs, which would be nearly impossible. Hashing is also irreversible and therefore information can be maintained confidentially.

What are the blockchain use cases in insurance?
Fraud detection – In many cases, insurance companies rely on previous damage history to insure. This information can be manipulated and as a result the insurance company can suffer losses. Fraud also occurs when claimants make several claims for the same incident. Claim information can be stored on a blockchain and then tagged to the claimant identifier. This will help insurers fight fraud, but will require intervention at industry level to enable cooperation.

Claim settlement – Blockchain can automate claims by verifying coverage and claims
settlement through smart contracts. It will thus reduce administrative costs for insurance
companies. Since information on a blockchain is independently verifiable between
parties, this removes the pressure from the claimant to prove the facts.

Lower insurance cost – Blockchain’s immutability and security can help insurance
companies reduce the cost of insurance as there is added comfort. For example,
business processes using blockchains can ensure that there is digital evidence that can be used for claims. Marine insurance, which includes cover for losses during the transport of goods and property, can potentially be of great benefit. Logging business processes onto a blockchain will ensure that information is not tampered with and as a result insurers can reduce the cost of these products as there is greater comfort in underwriting and providing exclusions.

New insurance products – Insurance companies can offer insurance products that were previously impossible to offer, as there is a tamper-proof digital trail available to provide comfort to underwriters. This together with technologies such as IoT and AI can bring new products to the markets.

What is the future of blockchain in insurance?
While it is still early days for blockchain in the insurance industry, there is some promise
use cases and applications for it. Insurtech startups working on blockchain technologies
would need significant investment to work on these use cases alongside traditional technology
and insurance giants.

Insurance companies must set up standards and processes related to blockchain
technology. While these technologies can give insurers tools to share
and collaboration data, the companies must be willing to collaborate with each other.