Blockchain technology is the biggest disruptor for several industries in the current technological trends. And the field of insurance also comes under it. Blockchain technology is still in its infancy stage. During this stage, it has exceptional potential to increase data security, reduce paperwork and save time and streamline business operations by cutting time and cost. Here, we are going to have insight into how blockchain technology in insurance will reap benefits through smart contracts. Smart contracts are based on blockchain technology.
But let’s have a quick recap of what is blockchain technology
In simple words, blockchain is a public record system, where anything can be recorded from physical assets to electronic cash. This is a ledger system which has a decentralized database for storing assets or anything and having access by anyone. It is mainly popular for bringing in transparency and security to the data kept in the blockchain-enabled applications.
How is it secure?
All digital transactions have a record in the blocks of a blockchain.
A transaction is linked together in a cryptographically protected block with other transactions that have carried out. Due to its peer to peer network, members in the network can verify the transaction.
Benefits of blockchain technology in the insurance industry
Blockchain technology in the insurance industry can facilitate all the complex processes of insurance and bring disrupt changes to the insurance business model.
Blockchain will put an impact on these things :
1. Minimize identity fraud or theft
2. It provides a kind of system which one can verify
3. Minimize fraudulent activities
4. Decentralized data repository which in turn provides enhanced security
5. Reduced paperwork
6. It can improve efficiency across the insurance value chain.
The role of blockchain smart contracts in insurance
The work of insurance business generally revolves around many operations which involves insurance contracts. They engage in work like rating a client and making decisions on paying a legal claim, premium, and interrogation of frauds. Moreover, industry experts surmise that blockchain has in it what it takes to streamline how insurers deal with clients. So, it is making changes in insurer value propositions and business operations completely.
The insurance industry has insurance-related information which needs proper handling, security and blockchain can allow for all or most data-related transactions for an insurer with the help of the smart contract. With the involvement of blockchain, a smart contract helps to execute and impose the negotiation or performance of an agreement.
Smart contracts are digital and thus it can enhance the efficiency in the insurance value chain wherever time, effort or money is used to confirm information before processing transactions. To illustrate, the insurance industry deals with insurance contracts which are hard to comprehend by people because of the legal language involved. If these contracts are on the blockchain, they become transparent and responsive. Smart contracts exactly do this. Thus, Blockchain can record policies and claims (insurance contracts). These are legalized by an approved party, and it makes sure only legal and valid claims are paid.
Blockchain use cases could expand its reach into the other types of goods that insurance companies insure. Currently, it provides traders, insurance companies, financiers, consumers, claimants and law enforcers with a history of an item’s authenticity, existence and ownership. This type of use cases is valuable for consumers, insurers and intermediaries alike.
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