Blockchain application in the insurance industry

by Lumai Mubanga

The insurance market is one of the largest and dynamic industries. It is one industry where quick decisions need to be made based on real and authentic data as well an industry fraught with fraud, inefficiency and unprocessed claims amounting to billions of dollars. How will blockchain technology help such an industry?

Insurance is a prediction market. People more or less like place bets based on a future event that will likely happen. Some predictable future events include a natural disaster such as an earth quark or a cyclone in an already prone area, or the payment of college fees for a grown-up adult.  These are highly probable events.

The above situations highly recommend for this industry to adopt blockchain technology. When the insured event happens, insurance companies need to make quick decisions based on valid data, eliminating fraud and inefficiency at the same time. Here is where blockchain wins it all. When it comes to reliable data with high levels of security and trustworthy, blockchain can provide that with a lot of transparency. 

In a study conducted by Accenture, it reported that 46 per cent of insurers expect to integrate blockchain within a period of 2 years. In an event that the insured decides to makes a claim, he will be required to log in that claim on the blockchain solution together with their evidence immutably on the chain and have it validated by the rest of the network. This will be very easy to verify because natural disasters, for example, are easy to verify. The insurer will surely take this undeniable evidence as concrete truth.  

Claims are a particularly uncertain area of insurance. Processing times for claims take unnecessarily long because they involve parties with lop-sided information that are at odds with one another.

A dynamic blockchain solution might involve the use of smart contracts to fix claims automatically followed by other automatic payments when a specific set of requirements for a claim are met. A company known as Aigang is exploring a solution similar to this. They are insuring smart devices and automatically processing claims by having the devices log their state on the blockchain. They currently support insurance for phone batteries and are working on implementations for smart cars, smart homes, and drones.

Additionally, a group of European insurers have come together to form the Blockchain Insurance Industry Initiative (B3i), which intends to use blockchain to add security and transparency to current insurance services.

As can be seen, blockchain will definitely benefit both the insurer and the insured. With smart contracts at play, the insured will feel confident about getting their premiums on time while at the same time, safeguarding the interests of the insurance companies by only processing validated claims as opposed to bogus claims.