The insurance industry is currently going through an intense period of digital transformation. New technologies transform how people buy insurance, how risks are underwritten, and how claims are settled. As a result, insurance providers must find innovative ways to adapt to their customers’ new demands and remain relevant in this increasingly digital world.

The insurance industry plays an undeniable role in every human life. Be it health, property, or any risky insurance, and everyone has their covers in claims.

Blockchain technology makes it possible to add value to the insurance sector workforce. The blockchain has the potential to fundamentally transform the insurance industry by addressing issues of trust, transparency, and efficiency in transactions. 

With blockchain, transactions are recorded and verified, privacy is maintained, and data ownership is decentralized. Blockchain technology could help insurers reduce operational costs, improve customer experiences, and increase business agility.

What is blockchain Technology?

In blockchain technology, transactions are recorded by multiple computers in a decentralized, digitized ledger. It uses cryptography to ensure the authenticity of the transactions and uses a distributed network to verify transactions. 

The purpose of blockchain technology was to support the Bitcoin cryptocurrency. It has since spread to other industries and is poised to transform the world as we know it. 

Blockchain technology has applications beyond cryptocurrencies, which includes healthcare, insurance, service industry, and supply chain management. Blockchain technology has the potential to benefit the insurance industry significantly.

Why is the insurance industry adopting blockchain?

It is possible to implement blockchain in the insurance industry in several ways. Electronic claims processing is the most prominent application, as the blockchain can track the entire process.

With blockchain, insurers can have a verifiable digital record of each step of the claims process, from submission to payment. It is possible to use a blockchain record as proof in a dispute. 

Blockchain can also streamline the claims process, making it quicker and easier for customers. Blockchain allows for tracking ownership of assets like ships, airplanes, and other valuable assets that are insured for a considerable amount for the duration of the insurance policy. 

Using blockchain, insurers can track these assets’ locations and monitor them for signs of wear and tear. Especially when insuring aircraft and other transport modes that require a high level of maintenance, this can be extremely useful.

Blockchain in the Insurance Industry – Peer-to-peer (P2P) lending platform

One of the ways the insurance industry can use blockchain technology is through a P2P lending platform. 

The platform connects individual investors with borrowers who want to take out loans. The blockchain can monitor the progress of each loan, and if one of the borrowers fails to make a payment, the blockchain will notify all investors on the platform. The investors can then vote to decide whether or not to foreclose on the loan. 

This blockchain platform can be especially useful in the insurance industry. Investors in the P2P platform can use their funds to pay insurance premiums and get a much higher return on investment than they would from savings accounts. 

And the insurance providers can use the blockchain platform to get funding for their policies.

Blockchain in the Insurance Industry – Claims Settlement and Withholding

Another way blockchain can transform the insurance industry is by reducing the time it takes to process claims. Many companies use internal databases when processing claims, which can be time-consuming and inefficient. 

Blockchain technology has the potential to streamline this process and provide a secure, transparent database for insurers to access. Blockchain can also help reduce fraudulent claims by providing a secure database for information like the details of the claims adjuster and the contractor who inspects the damage. 

The blockchain database will record the details of people who submit fraudulent claims, and insurers can access this information—providing the insurer valuable information when deciding how to handle the claim and how much to pay.

Blockchain in the Insurance Industry – Smart Contracts

The insurance industry can also benefit from blockchain by using smart contracts. Smart contracts are a digital way of storing and executing agreements. 

For example, an insurance policy can be made into a smart contract. Blockchain can store information about the procedure and make payments when necessary. The blockchain can act as an oracle, receiving external data and sending it to the smart contract. 

The use of blockchain technology helps store information such as the amount of risk associated with a specific policyholder and the amount of premium paid. 

We can use blockchain to store information about the date the policy expires and the amount of compensation that needs to be paid each month. 

Blockchain in the Insurance Industry – Data Storage and Management

The storage and management of data are two of the most valuable uses of blockchain in insurance. Traditionally, insurers use centralized databases to store information, which can be a security risk because it is stored in a single location and is only accessible to certain people. 

If the database is hacked and the information is compromised, the insurer will lose a lot of vital information. Blockchain can help solve this problem by storing data across a decentralized network. This means that the blockchain database is not stored on a single computer. Instead, the information is stored on a network of computers. 

Hackers cannot access the data of other computers across the network if one computer is hacked. If one computer is hacked, the data on the other computers are not affected. 

The blockchain database can be accessed by anyone who has permission to access it, which helps distribute information across the network. It can also be used for artificial intelligence applications, making it easier for insurers to analyze data and predict future events.

Reducing operational costs with blockchain

The above benefits will help the insurance industry reduce operational costs, but they are not the only ways blockchain can help. Blockchain can help reduce the costs associated with data storage and cybersecurity. 

Data storage is one of the most expensive aspects of insurance, and storing data across a decentralized network can reduce these costs significantly. It is essential to keep sensitive customer information safe. Insurers can use blockchain to store customer data and distribute it across the network securely. This can help reduce cybersecurity costs significantly. Insurers use many resources to protect their systems from hackers, dramatically increasing operational costs. 

If the insurance industry uses blockchain, it can substantially reduce its costs. Blockchain is more secure than centralized systems by design, making hacking much more difficult. It means that insurers will have to spend less money on cybersecurity. These benefits can help insurers significantly reduce operating costs, leading to huge savings.

Improving Customer benefits with blockchain and Resolving Issues of trust and transparency

Using blockchain, customers and insurers can track the progress of each claim. It is one of the best ways blockchain can help the insurance industry improve transparency. 

Tracking the progress of each policy is also possible with blockchain technology. Ensuring customers know when their policies expire and how to renew them.

Another way blockchain can improve transparency is by making it easier for customers to understand their policies. Insurers can make their policies available on a blockchain-based platform, making it easier for customers to read the guidelines and know what they cover. Which can help improve customer satisfaction and make customers feel more confident about the insurance company they are dealing with. 

All of these benefits can make it easier for the insurance industry to resolve issues of trust among customers.

How could NSUR make use of blockchain technology

With blockchain technology, you could digitally store your medical records and send them securely to any healthcare providers you choose. You would own your personal health information, stored on the blockchain and accessible only by those you choose.  If you need medical attention, it will be much easier for other healthcare providers to access your documents. Prescriptions could also be stored on the blockchain, making them more convenient and secure.

Closing thoughts

Finally, blockchain is a new technology that will assist the insurance industry in collecting and storing data more securely. The application of blockchain in insurance may also result in increased automation. 

Furthermore, marketing departments could identify strategies tailored to their customers, resulting in a better customer experience and relationship. 

Smart contracts based on blockchain technology can help to simplify policy administration, increase customer satisfaction, and reduce costs.