The buzz about blockchain is growing, and uses for the technology continue to expand into new fields, including insurance. McKinsey & Company defines blockchain as “a distributed register to store static records and/or dynamic transaction data without central coordination by using a consensus-based mechanism to check the validity of transactions.”
Blockchain has the ability to send, receive, and store information in a decentralized ledger technology (DLT), which means online and offline assets can be assigned ownership and transferred between parties through a secure system with no central location or authority. The technology’s features include:
- No single point of failure
- Proof of insurance
- Increased efficiency
- Time stamping
- Tamper-proof audit trail
- No central authority
The Benefits
Blockchain has the ability to simplify the claims process, increase growth opportunities, alleviate high premiums, and assist people who live in catastrophe regions. The technology can improve customer engagement through the elimination of fear by enabling the client to store personal data on their own device and only share the verification of the data’s accuracy to the other blockchain participants, such as the insurer.
In addition, blockchain can enhance the fraud detection process by validating the authenticity of the goods in the claim and their ownership records, checking for police reports pertaining to the claim, confirming subsequent owners, and proving the date and time of issuance of the policy. By validating these facts through the distributed registry and customer data, fraudulent claims are less likely to be accepted. Moreover, reducing fraud and administrative costs required for verification reduces premiums for clients.
Blockchain can advance emerging markets and utilize the internet of things (IoT) for electronic device and home appliance insurance processes. The IoT in conjunction with blockchain would allow connected devices to receive coverage through smart contracts within the blockchain network and automatically identify damage when it occurs to begin the repair and claims process. Theoretically, blockchain’s smart contracts also would be able to support microinsurances in emerging markets by automating the underwriting and claims process.
The Future of Insurance
The possibilities are seemingly endless with blockchain technology. As the technology develops and insurance agencies find ways to begin integrating it into their processes, more and more possibilities will likely be uncovered. In addition, clients will benefit from the use of this technology over time, which may revolutionize the relationship between the producer and the client. As you continue to explore trends that could impact your future and your success in the industry, check out other current trends by downloading our complimentary eBook “5 Key Trends That May Rock the Insurance Producer’s Financial Future.”
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