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Widespread adoption of blockchain is happening sooner than you think (Photo: Shutterstock)Blockchain is predicted to remove 15% -25% of expenses and deliver an industry-wide saving of close to $ 5-10 billion in the reinsurance industry alone, and this is only the beginning.
In the beginning, it is possible to use blockbuster technology, early adopters that blockchain can lead to greater efficiency, reduce fraud and increase transparency across the claims process.
From parametric to commercial co-insurance, here are 5 key benefits blockchain solutions can provide insurers.
Related: Year in review: 5 factors affecting the insurance industry
Reinsurance
Blockchain has the potential to provide full visibility between the cedent and the reinsurer. This provides a full history of claims, with the ability to price the risk in full and reduce capital slippage as a payment claim as part of the contracting process. Prior loss, payroll, property, location and other information will be entered as transactions on the ledger for real time.
Related: Shifting sands: Assessing the current reinsurance marketplace
Parametric insurance
The ideal use for smart contracts. A parametric insurance contract pays out a set amount of money based on a simple business rule – or parameter. This parameter is based on a data point that is agreed upon in advance and published by a third party. Assessors provide data based on either physical assessment of damage or through models. With this in place, parametric insurance products could be integrated accurately and efficiently with the implementation of both sides of the transaction.
Related: Closing the protection gap with parametric hurricane insurance in the U.S.
Proof of insurance
Most people think of the little card that's being mailed to them after signing up. When a client requests proof of insurance, the brokers must provide the proof manually, but this process could be automated and verified with blockchain. Cryptographic proofs can not be tampered with and is a specific time period of coverage.
Related: Consumers still have major misconceptions about their insurance coverage
Commercial co-insurance
Typically, commercial insurance, a syndicate of co-insurers and an overall lead that is responsible for managing the entire lifecycle. Blockchain enables co-insurers to access the same, up-to-date data across the lifecycle, including claims. This is a manual effort to reke in claims from Bordeaux and automated and faster payments.
Related: Agreed value, coinsurance and deductibles
Internet of Things / Telemetry
An increasing trend in real-time data such as usage. The use of sensors and the world of IoT can provide more data than ever that can be used to track all aspects dealing with insurance. This can include dynamic changes to pricing based on how a policy can be applied to the insurance system. Blockchain provides the data and transaction rails that will enable these devices to be communicable and processes to be automated.
Related: IoT shakes up operations and underwriting
Rethinking insurance with blockchain
Blockchain technology is still in early stages, and we are just starting to discover its applications in the insurance industry. Widespread adoption of blockchain is happening sooner than you think
Ben Jessel is the head of growth at Kadena. He can be reached at [email protected].
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