How Blockchain Technology is Empowering Insurance Businesses?
The impact of blockchain disruption in the insurance industry is significantly observed with the radical transformations in its operational methods.?
From insurance giants to finance startups, the tremendous adoption of blockchain in the insurance sector is a hot topic of discussion among industry experts. A recent report reveals that the global market of blockchain-driven insurance companies will grow at a CAGR of 84.9% to generate USD 1393.8 million in 2025, which was recorded as USD 64.5 million in 2018.
Cool, there are no ifs & buts when it comes to leveraging blockchain solutions to ensure securer & faster payments in digital currencies. The idea of blockchain development is a great step to drive your business success with a more transparent & convenient way to integrate cryptocurrency in a typical modus operandi of insurance firms.??
No doubt, blockchain development is a profitable investment for insurance facilitators. But it’s quite peculiar to understand how blockchain technology is shaping the future of the insurance industry first.?
This article is all about the know-how & factors that justify the role of blockchain in insurance.?
Top Benefits of Blockchain technology for insurance businesses?
According to Gartner’s prediction, Blockchain is set to add a whopping amount of business value of $3.1 trillion, contributing to the growth of the global insurance market in 2030. Aren’t these stats impressive enough to prove the necessity of blockchain development for insurance companies??
Of course yes! Here are some major advantages of blockchain development that every insurance company must consider before investing:
Improved transparency & reliability?
The power of blockchain technology streamlines the insurance process that further offers transparency in the system. The absence of centralized authority enables smooth & uninterrupted end-to-end transactions to render automation throughout the process.?
In simple words, blockchain in insurance cuts down the costs, time, & efforts needed to conduct transactions for customers as well as service providers.?
Optimized security?
The possibilities of data breaches are the prime concern of blockchain development service providers. Whether it’s about securing stored user data or making it available for network members, blockchain technology serves data encryption & direct link to the transactions done through hashing. In this way, high-level data security is assured to the insurance companies.?
Reduced costs
The costs of integrating vendors & intermediaries can be reduced when no centralized player or third party is involved in the system. The authorization of insurance transactions can further bring down the time consumed as blockchain limits the interaction.?
Fraud detection
One of the major challenges most insurance companies face is the rising cases of fraud.??
Insurance frauds are reported with a huge loss of worth $80 billion every year in America, as per Coalition Against Insurance Fraud. Besides having smart analytics tools & systems to mitigate the risks of security breaches, insurance companies are most likely to rely on blockchain technology to deal with fraudulent activities.?
A case of false insurance claims on precious items can be taken as an example where a blockchain-based ledger is used to collect relatable data of insurance on extra valuable items.?
Although there are various alternatives to minimize the data risks, fraudsters are always ahead of the game as they’re well versed with technologies to break the security system of any business.
Blockchain technology is capable of empowering insurance businesses to trace time-stamped transactions that restrict fraudsters to conduct the undesired activity.?
The list of advantages associated with blockchain in insurance is endless. Now let’s proceed further to the next section that defines the use cases of blockchain development in the insurance industry.?
Use Cases of blockchain technology in the Insurance sector
Insurance companies are greatly influenced by the amazing advantages of using blockchain-powered integrations in their software systems.?
Once getting familiar with the blockchain benefits, it’s time to learn the use cases of blockchain development in diverse sectors of businesses existing in the insurance market.
?Check out the most popular use cases of blockchain in insurance:
#1 On-demand insurance scheme
Blockchain technology brings big relief to process, managing, & track on-demand insurance in one place.?
When policyholders find it difficult to keep a record of their insurance status, blockchain comes to the rescue with a flexible & convenient way to manage policy documents & other records of the insurance claims.?
In this way, blockchain blends well with the key necessities of on-demand insurance to maintain ledger & records of stakeholders with no hassles at all. Blockchain app development is in demand, particularly among insurance players who’re looking forward to making the most of this technology for keeping records of the policy from its initiation to end.?
No matter if it’s the holder’s policy record, risks, claims, underwriting, documents, or any other process, blockchain technology has revolutionized the entire segment of on-demand insurance services.??
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# 2. Smart Contracts
The involvement of underwriting agents & insurance brokers is no more essential as smart blockchain technology has replaced humans in this context.?
Insurance companies are turning towards blockchain solutions to connect with their clientele directly & set contracts of insurance with them.?
Smart contracts can be defined in simple terms as self-signed contracts that are driven by blockchain to match the terms of agreements. Such automated contracts contain digital agreements that are coded for policyholders and insurers.?
Smart contracts can be accessed by anyone as they’re built on blockchain and hence, they are ideal for developing transparency in the insurance system.?
In addition to this, the risks of human errors & pinpoint mistakes in the agreements are noticeably minimized due to the no human intervention.?
Though blockchain has eliminated the need for manual assessment, insurance agencies are witnessing high efficiency with strong credibility & customer loyalty.??
#3 Reinsurance facility?
Natural calamities & disasters such as floods, wildfires, hurricanes, etc. can cause serious damage to the living beings. In this scenario, insurance companies provide reinsurance to support people with value-added policy terms.?
Since the process of reinsurance is lengthy & complex, insurers are more than interested to invest in blockchain development to make it effortless & efficient.?
Insurance companies engaged with blockchain ledger can simply initiate detailed transactions without having to connect with several reinsurers to share & update customers’ data manually. This use case of blockchain in insurance saves time & spending on policy settlement & claims processing.?
One interesting report by PwC states that reinsurance companies saved approx $10 billion with the implementation of blockchain.??
#4 Fraud prevention?
The risks of fraud in insurance are alarmingly high at present. As discussed in the last section, the concerns around data breaches also push the demand for blockchain development in the insurance industry.
Believe it or not, insurance fraud contributes to a total loss of around $40 billion every year as per data shared by the FBI. All the fraudulent activities can cost a big amount of money that most insurance companies can’t afford to survive.?
Blockchain puts curtails such incidents up to a great extent as all executed transactions that run via a blockchain-driven ledger are secure & meant for the long term. One more thing to know about blockchain in insurance is that it leaves no room for modifications that further reduce the potential risks of fraud.?
Also, blockchain improves coordination with better communication among insurers. By having access to a specific blockchain ledger, insurance companies can identify suspicious activities with help of claims information.?
#5 Health insurance?
When it comes to health insurance, insurance organizations count on blockchain to share & monitor medical data with insurers as well as their healthcare providers.?
It’s a bit challenging to keep records of the medical history of policyholders with zero security lags. Blockchain in insurance plays a crucial role in processing fast insurance claims with the utmost confidentiality.?
A large amount of money can be saved by leveraging the blockchain in the database of insurance companies as it keeps patients’ data in sync so that hospitals or healthcare providers can access it at the last minute.?
#6 Vehicle insurance
?One major use case of blockchain in insurance is the automation of payout procedures.?
For instance, both an insurer & policyholder will get information about the insurance claims if an incident takes place all of a sudden.?
The policyholders expect an immediate payout for damaged vehicles, blockchain reduces all sorts of hassles in the process.?
#7 Life insurance?
The process of death claims demands a lot of formalities & time which is very tedious. The duration of receiving the insurance amount varies between a few weeks or a month.??
Blockchain not only simplifies the insurance claims process but also automates every single step of registering the life insurance claim.?
Summing it up
Now it’s crystal clear that Blockchain development has become a prominent need for insurance firms. All the benefits and applications discussed in the article are fair enough to prove the importance of blockchain in the insurance sector.?
The innovation in blockchain technology continues to make its mark in diverse areas of the insurance sector, its evolution is all set to take you to the next world of digital transformation in the coming time.?
Blockchain technology is the future of the insurance industry & businesses can spearhead its developments to add efficiency & security to their operations. Got an app idea in mind? Hire a team of dedicated & certified developers at Hie HQ & get ready to add value to your business idea.?