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The simplification of complex policies and processes, as well as the prevention of fraud, are also the main insurance uses
The wreckage of flaming cars may be a metaphor to describe cryptocurrencies, but auto insurance claims may soon be powered by blockchain technology (via Pixabay).
On December 10th, the insurance giant State Farm announced that it is testing a blockchain-based solution to improve the speed and accuracy with which auto insurance claims are resolved.
In testing the solution, the largest auto insurance provider in the United States is following several years of studies and interests by the insurance industry in ways the underlying distributed accounting technology blockchain and cryptocurrency can benefit from various lines of coverage offered by the multi-trillion dollar industry.
In particular, State Farm is examining the use of blockchain in subrogation, the process by which the insurer who made a mistake compensates the insurer of the injured party for the costs paid to settle a request for compensation for damages.
"Today, subrogation is a relatively manual process, which takes time and often requires physical checks to be sent by post to insurers," said Mike Fields, State Farm innovation manager. "You can imagine the time and resources needed to complete these transactions."
In addition to automating the payment process, the State Farm blockchain solution can create a permanent and easily verifiable record of each transaction. Fields added that "it not only reduces costs for insurers and reduces the potential for errors," but also has the potential to reduce the time it takes for consumers to receive the deductible reimbursement. "
This has the potential to improve another metric automotive insurer putting department store in: customer satisfaction. According to the J.D. US Power 2018 on auto insurance, this is an area where the industry is already doing very well, with record-record scores published in 2018, but there is a substantial reason to continue to improve it. "Low prices can attract new customers, but it's the service that keeps them in. Car insurers that increase customer satisfaction through all aspects of the customer experience make the price just a part of the overall relationship," he says. the report.
Surrogation is not the only potential use of blockchain in car insurance. According to an April 19 article by the Blockchain Council, blockchain can create a shared ledger of data for users and service providers, which can reduce both the risk of insurers and the potential for fraud.
For example, a distributed ledger containing the history of a car, regardless of whether it was repaired after a previous collision, contains original OEM parts (OEMs) and even the oil change history, would greatly improve the ability of insurers to estimate the real value of a car involved in a collision, automate the underwriting and processing of complaints with smart contracts incorporated into a distributed ledger, and assure buyers that the car they are buying is in driving condition secure, according to the ValuePenguin financial data site.
Other ways in which blockchain can improve insurance
The interest of the insurance industry for distributed accounting technology has been growing for several years, particularly in health and life insurance. As recently reported by the Modern Consensus, several major health insurers are conducting a pilot project to demonstrate the ability of blockchain technology to accelerate processes, make data more accurate and allow the sharing of confidential information.
As in the health sector, a 2016 report commissioned by the professional service company PwC, Chain Reaction: how Blockchain technology could transform wholesale insurance, concluded that a distributed register technology, allowed blockchain, would be more appropriate in the insurance sector. Unlike the regular blockchain, which creates a public transaction log created from anonymous sources, the authorized blockchain creates private and encrypted transactions that are only accessible by members of a known and pre-approved network.
Together with health insurance, the research firm CB Insights of March cited insurance for property and accident as a type of insurance mature for the interruption of blockchain technology, noting that automated intelligent contracts can lead to an improvement in efficiency.
PwC also noted that the many participants need often repetitive steps involved in the creation of an insurance policy – in particular large and complex "wholesale" policies – and the management requests are the first cases of blockchain in the insurance sector .
Similarly, says the CB Insights report, smart contracts can simplify the huge and complex reinsurance market, where insurers cover their bets by stipulating insurance plans in the event that they are hit by excessive demands, such as damage to fire or hurricane property.
CB Insights has also identified the field of fraud detection and risk prevention, thanks to the immutable nature of blockchain blocks. A 2016 McKinsey report on the insurance market has claimed that between five and 10 percent of all claims are fraudulent, and noted that the FBI has estimated losses for non-health insurers to over $ 40 billion a year.
And just as blockchain technology can help prevent fraud, it can also streamline and strengthen the Know Your Customer / Anti-Money Laundering regulatory requirements common to the insurance and financial sectors.
In a September blog post, Michael Curry, vice president of engineering-IBM Industry Platform, wrote, "KYC compliance processes, in particular, are expensive and time-consuming, with the addition, and significant, concern for extraordinary fines for non-compliance "Cost savings and time reduction are the biggest advantages, he wrote, emphasizing that a blockchain-based KYC verification can be shared between institutions after it has been performed once, rather than repeated every time it is necessary.
"For companies, this can be very boring, given the amount of information and certified documents they have to provide," wrote Curry. "By sharing KYC information between banks, the burden can be reduced, translating into a faster onboarding and less work for customers." It also allows the customer to place restrictions on who can see that data.
Leo Jakobson is a New York journalist who has spent most of the past 15 years dealing with the employee engagement and recognition business. He previously covered the eastern part of the boom and the Internet bankruptcy and wrote about politics in New York City. Disclosure: Jakobson does not possess cryptocurrencies.
