Blockchain May be the Cause of Metamorphosis in the Insurance Sector
The Insurance Sector has been expanding at a higher pace than ever before. The benefits offered by insurance companies and the urge of future risk mitigation entice many customers to pool in for a better future guarantee. According to Global Insurance Market Trends 2016: Life Insurance premiums accounted for more than 5% of GDP in many European countries (France, Italy, Switzerland and The United Kingdom) and some Asian countries (Japan, Korea and Singapore). Also Non-life direct gross premium exceeded 5% of GDP. This signifies the enormity and significance of the money put in the Insurance industry. Just as Blockchain has enabled to transform the finance industry, it can enable innovative and destructive changes to the Insurance business model. Small or large insurance companies are incurring huge losses because of false claims and scams that happen due to the maneuvering of Information and documents. To overcome these issues, insurance companies are using the Blockchain Technology into the existing workflow because of its tremendous certainty in terms of security and immutable nature.
How much could it yield to the Insurers?
According to a media release: Leading Indian corporates, including ones from the ‘S&P BSE 100 Index’, are now undertaking domestic/international trade finance transactions on the network. This is the highest number of participants on any Blockchain platform in the country. Also, FitchRatings views Blockchain as a potential game-changing Technology for the insurance industry over the long-term. The insurance companies can gain expense and operating efficiency through automation of the core operational costs at the backend of Blockchain Technology.
Blockchain offers to be the central repository of truth. Because of its immutable nature Underwriters can source data from external sources to automate some parts of the Underwriting process because the data in the Blockchain is trustable and verified through consensus. As microgrid electricity is no longer unthinkable, in the same way, we can capture customer specific data from remote electronic devices which can be transferred over the Blockchain network safely for further use in verifying claims. The company can also benefit by reducing distribution cost by optimizing product designs and understanding agent specific behavior. Moreover, insurers can price risk more accurately with the same.
How well could the Global Self-Insurance Client go?
To efficiently control and mitigate the risks associated with a company’s progress we need a solution where the company itself is competent and capable of managing the risks. A working prototype designed by the Allianz Global Corporate & Speciality (AGCS) is a self-insurance through a Captive Insurance Program. AGCS designs and runs this Captive on the multinational company’s behalf through the local offices through their Captive. And hence the company now has the power to centralize their control and self-insure their risk globally. However, this process is complex, slow and fragile. But, all parts of the Captive Insurance process can be accelerated radically using the Blockchain Technology. The policies, claims, and payments can be notified and finalized more securely and faster. For example, in a certain country where the company is based, an event of a flood is triggered: the traditional way would be emails and phone calls to the company making the involved parties difficult to track and produce information and may take weeks of time. Using Blockchain, the local administrator can submit their claim which will reduce all the work of verification and use of data files. When it comes to extending policies, using Blockchain, the time of Signature will be reduced by several weeks. This is possible by the Blockchain powered Smart Contracts and payment network which makes sure that everything is transparent to the involved members and coverage is clear. Moreover, the current position can also be tracked efficiently through the network by ensuring good data quality and communication.
Currently, a global Fortune 500 Corporation with the captive insurance operation operating in about 100 countries has implemented the Blockchain prototype with AGCS. The insurer’s Blockchain links to Citi’s CitiConnect API which can accept instructions from the Allianz Blockchain and disperse payments. The amount of money at stake in the Insurance sector is high and so is the complexity associated with managing it. The process of even checking a death certificates’ viability and the claim made costs a substantial aggregate in terms of money, time, and reliability. Nonetheless, the Blockchain Technology can surpass all regional restrictions, communication errors and data manipulation very easily to make it a potential game-changer for the Insurance sector.