Blockchain is no longer just a buzzword for those dabbling in cryptocurrencies such as Bitcoin and Ethereum. If you separate it out from the hype around cryptocurrencies it can offer many more benefits that have absolutely nothing to do with processing, tracking and storing of digital currency.
Blockchain is essentially a digital ledger which where transactions are recorded chronologically and publically. Information is secured using cryptography. The data can’t be tampered with easily as blockchain is resistant to modification. Information can only be added.
If used correctly and within the financial regulatory rules, it could help transform the insurance sector, which on a day to day basis struggles with things like storing data, fraud and the sharing of information. Here’s how:
- It can help make customer’s lives easier: Last year Axa announced that it was the first major insurance group to offer insurance using blockchain technology with the launch of ‘fizzy’. The technology enabled the insurer to launch a product that offers direct, automatic compensation to policyholders whose flights are delayed. “When you buy flight delay insurance on the fizzy platform, we record the purchase in a tamperproof network, the Ethereum blockchain, making the insurance contract equally tamperproof. This smart contract is connected to global air traffic databases, so as soon as a delay of more than two hours is observed, compensation is triggered automatically,” boasted Axa.
- It can help prevent insurance fraud: Paper-based claims have long been in operation and this system is an enabler to crooks that make multiple claims to different insurers. Usually when the fraud is identified it’s too late as claims may have already been settled and paid out. Typically, the criminal is long gone and shut down bank accounts and any other cyber tracks he or she may have left behind. Blockchain can put a stop to this madness and outdated way of doing things. Insurance claims and other data related to customers could be moved onto the immutable ledger system that blockchain offers. Nothing can be deleted – but you can add information. This will help to eradicate most common sources of fraud in the insurance industry.
- It can track and store records: This could be particularly beneficial for the health insurance industry. Blockchain can help to ensure that medical records are cryptographically secured. Access will then only be granted between relevant healthcare practitioners.
- It can provide better security: Regulations such as KYC (Know Your Customer) and GDPR (General Data Protection Regulation) affect most companies that store data about customers, including the insurance industry. Data stored using blockchain is tamper proof and the information can’t be changed. It essentially offers better security and the likelihood of correct information being stored and shared.
- It can save time: There are often delays when customer data is verified by different departments. Blockchain offers the ability for information to be shared across departments securely and with minimal effort.
Blockchain is still regarded with some suspicion and there is reluctance from companies because of the potential costs involved. According to one recent PwC study 56% of firms said they recognized the importance of blockchain, but 57% conceded that they didn’t know how to respond.
Blockchain will still need to be subject to legal and regulatory hurdles but there’s no denying that it could disrupt the industry, boost broker’s and insurer’s customer base and be a major asset in combating fraud.