Blockchain’s Potential Benefits for Insurers
What is Blockchain?
Blockchain is a data structure that enables the creation of a digital ledger of transactions and the ability to share them among a distributed network of computers. It enables participants to make changes to the ledger securely, without a central authority. Blockchain is the technology behind Bitcoin, a breakthrough application for money transfer.
Blockchain Has Four Distinguishing Properties
- Distributed: databases are usually hosted centrally (a “top-down” structure). Blockchains are hosted on networks and administered by the participants.
- Permission-less: all users are treated equally, with full read and write access.
- Immutable: old records cannot be reversed. A blockchain implementation provides no way to correct errors or redact private information sent by accident to the wrong recipient.
- Trusted: blockchains are based on mathematics, not relationships. Because scripts are open to all for review, these contracts themselves are trustless.
Five Blockchain Benefits
- Simple and fast transactions: participants can transfer information or data without third party intervention.
- Fully transparent and secure: users control the transactions. When a user wants to add or change information, the request is broadcasted to all participants holding copies of the existing blockchain.
- 24/7 accessibility/availability: data can be expediently transferred via the system 24 hours a day, seven days a week, without delay.
- Reduced cost: one ledger, controlled by secure and transparent technology, reduces mediators and costs to a minimum.
- Single point of truth: because blockchain is reliable and durable – an “unhackable” network – it can be used as a single point of truth.
Smart contracts powered by a blockchain technology will provide customers and insurers with the means to manage claims in a transparent, responsive and trusted manner.
Mutual and Peer-to-Peer Insurance
“Blockchain technology could empower people to manage (some of) their risk more directly, with peerto-peer and mutual insurance platforms based on blockchains.”
Internet of Things
By merging smart contracts, IoT and blockchain, IoT devices will be able to communicate with the insurance smart contract automatically, with transactions and contract validations taking place in real time.
One of blockchain technology’s best value propositions is the level of trust it fosters. It will practically eliminate fraud, due to the ability to validate authenticity, ownership, and provisioning of goods.
Blockchain will facilitate a simplified and faster underwriting process by eliminating paper work and reducing email communications, and increasing transparency among all parties.