Use Cases for Blockchain Applications in Insurance
Claims make up a large percentage of operations at insurance companies. Custom smart contract code can accommodate the parameters of a policy and execute action automatically through trustless identity verification. The smart contract can act as a purse for funds that are not controlled exclusively by either the policyholder or insurance company. The funds can then be automatically directed to the correct party when a verified event (a claim) triggers the digital contract on the blockchain. Settling a claim can take days or weeks, and smart contracts can settle claims instantly without the need for paper documents, photocopying, and complex web portals.
Reinsurance is when multiple insurance companies share the risk by purchasing insurance policies to offset the potential loss in case of significant incident or disaster. Blockchain could be a real asset within this space working to help automate calculations and rebalance. It can track funds available for claims and help companies assess financial risk and improve overall reinsurance strategy, saving both time and money.
Advanced technology can help attract customers with lower costs and more customized, easy-to-use interfaces. It is difficult to receive truly personalized or customized insurance policies at a reasonable rate. With increased transparency thanks to the public ledger, customers can onboard their data more securely and if they wish to share that data with other entities to onboard quickly for other insurance purposes. With public-private key technology, their data does not have to be linked to their identity, protecting them while still allowing them to benefit from automated policy customization and easy-to-transfer personal profiles.
- Real-time Claims and Payment Automation
Personalized payment plans and policies can now operate seamlessly for both insurance companies and policyholders using event-triggered smart contract technology. As events occur in real-time information from different systems work together to process the claims automatically and payout policyholders or have policyholders pay their premium or deductible. This makes for an improved customer experience and prevents loss for insurance companies while decreasing personnel related overhead.
Filing claims is an incredibly involved process without a reliable or calculable outcome in certain circumstances. Parametric insurance functions to provide more exacting terms and conditions in the event of an accident. Parametric insurance decreases administrative workload in a claim settlement process as it is event-based policy, not dissimilar to how a smart contract works. The smart contract is the ideal piece of technology for an already event-triggered insurance policy, now rather than a person verifying the claim it can all be automated via smart contract. While parametric insurance is not as frequently used as other policies and insurance plans, parametric insurance could become an industry norm thanks to blockchain technology stepping in as the perfect vehicle to manage these more customized policies.
The underwriting process takes a highly skilled and qualified individual to determine how much coverage a policyholder will get and how much it will cost. It takes high-level data analysis to underwrite, and it is currently a very time intensive process. Using blockchain data storage management and analysis tools, underwriters can decrease risk liability and automated the policy pricing process, leading to a more cost-efficient insurance model and customer-friendly experience. It can also bring an element of transparency to the underwriting process to help build trust between customers and insurance companies that is a present pain point.
Data management and more efficient storage might be one of the most significant use cases for insurance companies. It can improve not only data storage and security but how data is transferred and shared to streamline processes that involve multiple parties and are authentication-heavy. Blockchain can help insurance companies plan for a better future and improve how they distributed policies and settle claims daily. Using timestamp and digital fingerprinting, a more transparent, private, and secure repository for shared data is created. This helps to facilitate more affordable coverage delivered trustless-ly and seamlessly.