
Niraz Buhari, market leader in the insurance industry, shows…
Blockchain is expected to fundamentally change how the insurance and reinsurance industry works by enabling closer communication between stakeholders, including suppliers, reinsurers and brokers.
The main feature of blockchain that supports the security and accuracy of transaction data is the development of trust between parties sharing information.
Blockchain in reinsurance streamlines key procedures like compliance checks, reducing processing time and cost of compliance checks.
Businesses around the world continue to transform thanks to blockchain technology.
Although blockchain is a commonly used term in recent advances, many people are unfamiliar with the idea.
In other words, many people don’t know what blockchain technology is.
Simply put, a blockchain is a distributed database system that stores records of transactions and other activities. As a result, it allows signing, trading and confirming without the need for an intermediary.
Blockchain allows trade transactions to be conducted securely and transparently without the need for an intermediary.
Technology is poised to significantly improve the way we do business in virtually every area based on the highlighted attributes.
The insurance sector is one of the companies expected to transform the way stakeholders interact with each other.
Brokers, reinsurers and suppliers are some of the ecosystem partners that make up the insurance sector’s stakeholders.
The difficulties in the insurance sector
The problems with the current insurance arrangement continue to have numerous loopholes that undermine the multi-trillion dollar global sector in many ways, despite the increasing use of technology in the insurance industry.
For example, customers still turn to brokers to buy new insurance policies, and policies are still processed using paper contracts that are prone to error.
Ensuring efficiency is made more difficult by the complexity of the insurance processes.
Customers, brokers, insurers and reinsurers are all involved in the construction of the main product, risk management.
At every stage of the insurance processing process, there is a risk of information loss, policy misunderstandings and lengthy processing times.
Insurance and Blockchain
Trust, transparency and immutability are three of the core properties of blockchain relevant to the insurance industry.
Blockchain technology works by providing a single source of information that is updated in real-time, allowing parties to keep the detailed asset, contract, and data ownership records without the need for intermediaries. Microinsurance providers like Smart Cover are already using blockchain technology to offer their customers a better and more transparent service.
Blockchain in the insurtech space provides a single source of data (truth), which greatly reduces friction in business operations.
Distributed ledger technology (DTL) networks are facilitated and automated through smart contracts enabled by blockchain technology.
As a result, several sub-sectors of the insurance business could benefit from blockchain applications, including:
- Risk mitigation and risk management to improve efficiency.
- Leverage a smart contract for Property & Casualty (P&C) insurance to increase efficiency
- Health insurance to promote interoperability and backup of medical records
- Life insurance can help automate death claims and free family members from the tedious process.
Reinsurance with Blockchain
According to British Insurance News, inefficiencies in risk knowledge, placement, claims adjustment and compliance are the biggest problems for reinsurance.
Reinsurance is a crucial part of the insurance chain, and smart contracts on the blockchain have significant potential to transform this industry.
According to research, blockchain technology can help reduce the time and costs associated with processing orders, resolving disputes, and reconciling important procedures like compliance checks.
A better understanding of risk and identity is also believed to be possible with blockchain, especially given the volume of data being exchanged between many parties including clients, brokers, reinsurers and third party service providers.
Because each entity requires multiple data inputs and reconciliations, blockchain technology is a good choice to address the underlying issues.
Blockchain can speed up and facilitate the transfer of risk from one insurer to another, which is now a tedious process of settling insurance claims.
Blockchain records every transaction, including premium payments and losses, in the insurer’s and reinsurer’s ledger using smart contracts.
The procedure saves the institutes the need to coordinate individual applications and paper files.
The data exchanged via fixed registers also allows reinsurers to allocate money to claims in real time.
They don’t have to rely on the main insurer for information on every claim, allowing them to resolve disputes quickly and effectively.
How can Blockchain Aid Developing Nations be insured?
In underdeveloped countries, the vast majority of people do not have access to health insurance.
Due to the significant administrative burden and the possibility of corruption, health insurance is quite expensive.
Customers contact insurance agents at traditional insurance companies using a “pen-and-pencil” technique, who then perform liaison duties to provide the consumer with the best options.
Birth certificates, treatment records, and previous insurance coverage are examples of medical documents that are prone to loss and destruction.
Developing countries will find this paradigm particularly challenging.
Consistent telephone and internet access is a challenge in most developing countries.
Smartphones and cloud-based blockchain programs offer a solution.
Final reflection
While blockchain may not be able to solve all of the problems insurers are currently facing, it is a crucial enabling technology that has the potential to foster stability, transparency and trust.
The ability to automate the process makes the insurance sector more effective, which is an absolute plus.
In order to prepare for a soft launch as a SAAS model in 2022, one of our group companies, Smarttek, is now conducting further research and development in the field of blockchain.