The use of blockchain technology in insurance sector is something relatively new. London, the fintech destination of Europe is the first one to explore the potential uses of distributed technology in the insurance industry. The Capital of England already has a couple of companies who have already implemented it into their offerings.
The blockchain is known for its transparency, security, immutability and reliability. All the properties that make a lot of sense to be implemented in the insurance sector. While issuing an insurance is not a big problem for the insurance companies, it is when the claims arise, that they have to make sure everything is in order before paying the insured, the amount they are owed.
In a recent report, Blem, the company that creates software solutions for the insurance industry has recently launched a product that makes use of the blockchain technology.to maintain a record of all the claims. The distributed ledger will allow insurers and reinsurers to keep track of the claims as well as their obligations towards settling those claims.
While the blockchain based record keeping is of great help to the insurers, it also comes as a relief to the customers, who can now be assured that the insurance company will not be able to modify the records related to insured sum, claims, and settlements. Whenever a record is stored on the blockchain, it is timestamped and the immutable feature of the distributed ledger prevents the records from being modified by anyone. Even if someone makes changes to it, the time of such modification will be recorded as well, along with identifying details for the cryptographic key used to access and modify the records.
At the same time, the use of blockchain in the insurance sector will also allow the companies to automate the claims settlement. With records of insurance policies stored on the blockchain, the insurance agencies can create smart contracts for each policy with details of payouts, account to which it has to be paid and the prerequisite condition for the execution of the respective smart contract. In case of claims, the insurance investigators can verify the claim and record their findings on the blockchain, depending on which the smart contract will be executed. This will not only streamline the industry by reducing the time and manpower otherwise required to manually complete the process but also reduce the waiting time for the insured to receive his/her insurance claim.
Even businesses can benefit a lot from the implementation of blockchain technology by the insurance industry. The rise of shared economy has led to the creation of new business models like that of Airbnb, Uber, Lyft and more, where the customers and service providers keep constantly changing. There are no existing on-demand insurance policies that offer coverage for such businesses, mainly due to the variables involved in the business, making it hard for traditional setup to keep track of it. But blockchain technology combined with smart contracts will not only make the tracking process easy, but it will also enable the agencies to issue insurance policies individually, on-the-fly.
The same process has already been implemented by SafeShare, an insurance provider using blockchain technology to offer coverage to the users of Vrumi, a startup that allows people to rent out spare rooms in their houses for businesses to set up an office. The insurance offered by SafeShare is underwritten by Lloyds. Also incidentally, both Vrumi and SafeShare are also based out of London.
The use of blockchain technology in insurance sector will not only reduce the probability of frauds and automate the process, but it will also enable the insurance companies to adapt to changing business atmosphere and offer solutions that can meet their requirements.