Blockchain technology has been heralded as one of the most iconic technologies to emerge late 2000’s with numerous applications. It’s a technology that simplifies the existing legacy processes and boosts their performance delivering robust and secure results. Hence its disruptive nature has found applications in various sectors with firms willing to take a bet on using this product. It has already made its mark in supply chain, document sharing, authenticity verification, cross border transactions and post trade settlement analysis. Now according to major strategy firms, it also has the potential to disrupt one of the finest financial products. Let’s deep dive into how that can be possible:
Insurance is one of the world’s oldest and finest financial product with a market cap of $ 5 Trillion. It has been existent from 3rd BC practiced by Chinese and Babylonian traders to transfer risk so as to minimize losses. From then on, Insurance sector has undergone many changes and has reached an equilibrium system where the process of Insurance has become a reliable one. Despite these changes, the sector still has its own set of inherent problems that have proven to be detrimental to its smooth functioning. Major strategy firms have already explored the problems along with blockchain solutions. Let’s look into these problems one by one and see how blockchain would be helpful.
Fruad detection and risk prevention:
The major problem associated with the sector currently would be the false claims that surface owing to frauds. Blockchains ability to provide a public ledger across multiple parties, eliminates the potential for errors or fraudulent activities. A digital depository that is decentralized has the ability to independently verify the authenticity of the customers, their policies and transactions. Blockchain can keep a track of all the customer related activity and in a sense provide the customer journey right from the time of issuance of the policy to its claim.
Hence false or fraudulent claims can be eliminated as issuers will be able to identify duplicate transactions or those involving suspicious parties. Insurers have suffered with fraudulent claims especially in the US healthcare system which amounts to atleast 1-2% loss in total revenue every year. This can be attributed more to the gap or error in the patient level data and their prescriptions which affects medicare providers significantly.
I will talk more about how Blockchain can power insurance sector in the subsequent parts.