Is insurance going to be subject to the same level of dramatic transformation? Here are four ways we expect blockchain technology will disrupt insurance.
If there is one constant in the insurance world, it’s fraud. No matter the product or the value of it; wherever something is insured, there seems to be someone trying to exploit it. It’s so common in fact, that insurance fraud makes up 10% of all premiums. Now imagine that an insurance company was to achieve a state with no fraud. What do you think that would mean for their competitive edge in the market?
By combining the data that is generated around us all the time with the immutable power of blockchain technology, insurers can create foolproof systems of record. These systems of record decrease the margin for fraud to a point where it becomes near impossible for a regular person to commit fraud.
We envision a future where immutable blockchain-backed proof of ownership is combined with data-enriched incident reporting to lower fraud, decrease operational costs and deliver a better insurance experience for consumers.
The huge amassing of data and user profiling is changing the way we live our online lives, restricting our freedom of expression and ultimately threatening our right to privacy. Think it won't happen to you? Recent data from Risk Based Security states an estimated 36 billion records were exposed online in 2020!
The risk is real, and we’ve not found a clear way to deal with it. Consumers want to protect their data but don’t have the tools to do so because everything is in the hands of third parties. At the same time, governments are creating tough data regulations, such as the GDPR, that ask a lot from companies.
This is where blockchain technology can come in to improve data privacy and ownership. Blockchain technology is decentralized and does not rely on one central point of control; therefore it is harder to obtain data illegally. And more importantly, blockchain solutions make it possible to enable and remove access to specific token-backed files, in addition to changing ownership of those files on the fly, allowing you to share only particular data with the companies you choose. This means that when it comes to data ownership, consumers will be able to grant insurers access to specific data to confirm things like income or health status, without forfeiting any sensitive data.
Historically we have seen a lot of issues with trust in the insurance industry. Where consumers feel they lack insight into specific policy clauses and processes during a claim, insurers have no good ways to identify the authenticity of claims. At the core, it comes down to a lack of transparency.
Blockchain systems, like Bitcoin, are inherently public. Because we can store information, like claims or purchases, on the blockchain, we can publicly track their history and associated processes with complete transparency. Our insurance solution fully supports this level of transparency.
A development that has completely revolutionized traditional finance is something called DeFi, or Decentralized Finance. This new way of thinking uses blockchain technology to shift the financial industry from an institutionally driven market to a consumer-driven market. You can imagine situations where instead of going to a bank for a loan, a person can take out a loan with another consumer. The result is lower fees for the person taking out the loan, and higher yields for the person lending out the money. And the best thing is, it is all governed by code.
We expect to see this development take root in the insurance industry as well. Trustless smart contracts could, for example, pool money to create enough liquidity to cover an insurance fund. Consumers pooling the money would then earn a fee from the insurance premium. This development could have profound implications for the insurance industry. It would remove the need for third parties and change the role of the insurer in the insurance process.
As you can see, some interesting developments are going on that are going to have an impact on the insurance industry in the coming years. We have listed only four here, but I can assure you there will be many more disruptions due to this technological shift.
Did any of these points spark your curiosity? We are experts on blockchain technology in your market and would love to help you answer any questions you may have. Click here to book a call with us and start transforming the insurance industry.
Insurance fraud is the act of abusing the terms in an insurance policy to create a financial benefit. This is often done by giving false information or provoking a specific situation which would be covered by the insurance policy.
Insurance fraud is a serious crime in most countries. In order for a crime to be considered insurance fraud, there has to be a specific intent, which means that the prosecuted knowingly committed an act to defraud.
You can go to jail for insurance fraud. Most jail times are up to 5 years with a fine of up to $50.000
Data ownership is about who owns your data. In many cases, the data owner is a company you are involved with or a third party.
P2P stands for Peer-to-Peer. This means from one person to another, instead of through an intermediary. In insurance, this means coverage can be provided by individuals to other individuals.