Blockchain is essentially a distributed ledger technology for recording and tracking immutable digital transactions as part of an immutable ledger, validating, time-stamping and replicating them in real time, with each participant in the network holding a current copy.
Blockchain removes the need for trusting an intermediary because there is full visibility and security across its distributed network of participants. This is why blockchain has been rapidly deployed in the highly reliable and Security-sensitive industry of insurance.
Transparency
It is highly complex for auto insurance in the market.Blunders, discrepancies and procrastination gets major irritants for our time and money. Its transparency can aid in the filing of claims by allowing auto service providers and insurance companies to share information about claims through the self-executing smart contracts, to reduce paperwork, improve record checking reconciliation and fraud detection at the same time. Advances in technology often allow the verification of insurance claims without compromising privacy. For example, data on driving habits and locations can be obtained from vehicle telematics systems without compromising a driver’s expectations of privacy. Its append-only, tamper-proof, and immutable features make it difficult to gain unauthorised access and manipulate the data, and support new product and service developments such as insurance telematics in the area of transport. And it can provide a new way of preserving identity, with privacy-preserving verifiable identity assurances, in areas such as work or education.
Efficiency
Whenever you purchase an auto insurance policy, several contracts and pieces of data must be communicated through intermediaries, such as a broker or lawyer, which adds time and expenses to an auto claim process. With blockchain technology, auto claims can be processed faster for the client. By employing smart contracts, instead of jumping through the bureaucratic hoops necessary to process an insurance claim, insurers can immediately, and automatically, compare terms against a discreetly secured data pool. Paperwork for an accident claim, ha! That’s so 1971. Minutes after an event, your contract can be settled. Instead of multifarious faith-based handshakes, deals are executed through integrated programmable legal contracts, each harbouring the rules and conditions explicitly encoded into them. It also allows companies to trace supply chains, providing greater transparency with their partners in order to set up trustworthy ecosystems. And, of course, it can be used by insurance companies to verify vehicle mileage or provenance – as this will prevent fraud – while other products and services can be provided to customers through these portals.
Automation
Automation replaces labour-intensive operations with high-tech processes to increase speed, lower cost, reduce error, and raise levels of customer service. It allows firms to overcome human variables (turnover, illness) as a compromising factor in the flow of operations, to stay ahead of digital global markets. Through blockchain technology, subscribers capture vehicle data, pay premiums, file claims and automatically assign scans for repair. Smart contracts, legal contracts stored in blockchain that trigger when certain conditions are met, can stop fraud and keep all transaction history. The process is transparent and impossible to tamper with. Blockchain technology will help insurers to improve underwriting and claims processes, providing more reliable customer data, reducing loss ratios and modifying portfolio risk profiles.
Security
Insurance firms need to review their approaches to the handling of consumer data in order to prevent fraud and ensure adequate safeguards for their clients. Many insurance firms still use old fraud-prevention data from vetted clients, as well as outdated tactics, which lead to lengthy manual procedures, where errors are inevitable and delays likely. Smart contracts – written agreements stored on the blockchain – could automate much of that, and even facilitate the body-shop and auto-insurance claims, while eliminating faulty records and at the same time checking, reconciling, automatically flagging fraud and paying out faster, and making regulatory compliance easier. The integrity of records underlying transactions on blockchain networks is ensured by the cryptographic measures used to validate transactions and by the verification of the information they signify through ‘oracles’ – third-party sources that contracting parties design to keep their smart contracts on track.
Trust
Blockchain is best known for underpinning digital currencies such as Bitcoin, but it can also make the processing and administration of insurance far quicker, smarter, and more error free. It will improve the speed of checking records, more accurately reconciling invoices, detecting fraud more quickly, automating many manual tasks – and, even now, automating many manual tasks that themselves involve the processing of information. This technology allows insurers access to an end-to-end record of the value of any insured object at any given point in the lifetime of a policy, and to trace the entire journey of an object from inception up until a claim is ultimately settled. It also affords insurers the ability to track all transactions belonging to an insured policyholder and streamlines underwriting processes. Blockchain also offers a privacy guarantee. Because its distributed database isn’t located on a single computer but rather across many, its contents can’t be changed as easily. There are fewer opportunities to launch a spoofing attack, as well as authentication threats.