Senior Financial Services Analyst at RSM US, a tax, audit and consulting firm.
“The great thing about blockchain is that it can transform the insurance industry,” said Daly.
“Today, many insurers are still lagging behind in adopting this technology, but more and more companies are creating various proofs of concept and starting to leverage blockchain in different ways.”
Dailey, who has 20 years of experience in the insurance industry, said the most important application of blockchain to date has been with parametric triggers.
“In the event of flooding or strong winds, policies could be triggered via smart contracts without human involvement,” she said.
“If you meet all the parameters, you can get paid immediately through the blockchain.”
A smart contract is a self-executing program stored on the blockchain and executed when certain conditions are met. parametric insurance product.
What are the advantages of using blockchain in insurance?
According to Daily, many insurers are interested in blockchain technology to leverage real-time data to provide faster and cheaper solutions.
Due to the decentralized and open nature of blockchain, anyone can see the transactions recorded in the database. Once billing is moved to a blockchain-based ledger shared between carriers in a peer-to-peer network, it cannot be easily changed. Insurers within the linked network can access historical claims information quickly and accurately.
“Blockchain will allow insurers to share a single trusted source of truth, ultimately reducing fraud and making claims management much easier,” Daly said. says.
- Accurate risk assessment
Insurers and reinsurers sharing access to the blockchain ledger can access data related to policies, premiums and loss history, simplifying the underwriting process.
- Task automation
All processes related to smart contracts can be automated and rendered securely using blockchain, eliminating the need for human intervention in billing. This efficiency can lead to cost savings for insurers, leading to lower premiums over time. On the claims front, blockchain can power straight-through processing and initiate faster payments to policyholders.
What are the challenges of using blockchain in insurance?
A central challenge for businesses adopting blockchain technology is obtaining clean data.
“I always say that data is like oil.
“Insurers understand the technology and are investing in blockchain, but cleaning data and extracting data from multiple legacy systems can be risky, so there are many insurers out there. I think you will find the problem.”
Insurers also bear the risk of regulatory uncertainty. It is still unclear how regulation will affect the legality of smart contracts.
Finally, cybersecurity is a major concern. Blockchains can offer many security benefits, but they are not completely secure by default. A closed or private blockchain network is considered more secure than a public blockchain network in which all users can participate.
However, threat actors can send phishing emails to obtain a party’s private cryptographic keys, allowing them to make illicit transactions on a closed blockchain. It can also exploit vulnerable endpoint her security to gain access to data stored on the device of the person concerned.
“As businesses expand their digital footprints, Cybersecurity is always an issue‘ said Daly.
How can insurance companies leverage blockchain technology?
Companies looking to integrate blockchain into their growth strategy may need to look to third-party providers who specialize in implementing new technologies.
“The number one thing I would say to insurance companies is that they don’t have to go it alone,” said Daley. “It starts with cleansing the data, which is probably the hardest part when it comes to insurance.
“Many companies still have multiple legacy systems. Finding a way to extract that data without impacting their finances and complying with regulatory compliance is a constant challenge.”
Adopting new innovations always involves risk. But Dailey believes the time is ripe for more blockchain acceptance in the insurance industry.
“I think customer demands are changing. Everyone wants things at their fingertips,” Dailey said. I think we will see more and more growth leveraging smart technology as we compete with retailers that can offer timely service and instant payments.”
Do you think the industry will see more blockchain adoption this year? Leave your thoughts in the comments below.