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Jillian Slyfield is a leader of digital economy practices at Aon. In this role, Slyfield tackles the digital revolution of traditional industries and the on-demand economy. His areas of interest are alternative mobility, the future of work and the digital risk of the new economy. It can be reached at [email protected]
Accenture reports that the global blockchain market in the insurance industry is expected to grow to $ 1.39 billion by 2023. There are countless use cases for blockchain in the insurance industry, as it is an industry of contract execution, collection of detailed and confidential data and third party payments.
As such, blockchain promises to redefine many roles, allowing elegant technology to replace tedious, error-prone and sometimes fraudulent transactions.
Verified information is critical to the insurance industry, and trust is critical to the credibility and functioning of the digital economy. Blockchain technology offers the insurance industry the opportunity to rely on a single source of truth that is safe, accurate and transparent.
To understand better, think about an online transaction initiated by an individual. A distributed network of computers verifies the identity of the individual and the data involved in the requested transaction. Once confirmed, the new transaction is added to the existing chain. This transaction is called a block and the individual has added a new block to the chain. Blocks are permanent and immutable.
An insurance policy is a contract between an insurance company and a business or individual. We have seen an increase in the use of smart contracts, which is a self-executing contract that documents legally relevant events based on terms written directly in lines of code.
It doesn’t take much to imagine the possible efficiencies when a payment from an insurance contract can be triggered using verified data on all parties to the transaction without anyone from the insurance company being involved.
With these growing capabilities, blockchain has and will continue to provide limitless possibilities.
Life insurance is one of the first use cases for this technology because it is complicated to sign up and processing claims is often tedious. According to the Property Casualty Insurers Association of America and FICO, up to 10% of life insurance claims are fraudulent and cause additional friction in the settlement process.
Blockchain technology can be used to collect health data from electronic health records to simplify the underwriting process. At the time of a claim, the blockchain can be used to verify death and validate key documents.
These efficiencies have the potential to eliminate data fraud and significantly reduce the time it takes to pay a payee. The result is cost savings for the insurance company and a better customer experience.
Surrogacy is an antiquated, paper-intensive process that often results in countless paper check payments from one insurance company to another.
To this end, billions of dollars are exchanged between insurance companies every year. It is usually done on a per-claim basis, with each subrogation payment made individually.
Blockchain technology was used to verify policy and claim information, determining the exact surrogacy payments due. Through a smart contract that uses blockchain technology, each company adds up what it owes to the other and then the delta is automatically reconciled via an electronic payment.
Over the past decade, the valuation of personal and commercial automotive policies has become increasingly sophisticated. Usage-based insurance (UBI) written on a Per Mile basis is now commonplace.
Evaluation factors include data from telematics devices, such as hard braking, steering and acceleration. Contextual data can also be included, such as the time of day, the number of people in the vehicle or weather conditions.
Each of these factors can affect the rate per mile charged to the driver. Blockchain technology stores this transaction data and uses a smart contract to calculate, bill and charge the premium. In the event of a claim, many of the same data can be used to judge a claim and make a payment efficiently and quickly.
The insurance industry continues to see the benefits of implementing blockchain in its daily activities and procedures. Implement a truthful checkpoint within an organization, reducing fraud, increasing profits and improving the insurance experience. &
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