Blockchain is set to be the great disruptor for many industries. However, we haven’t found a comprehensive source of information for insurance companies wishing to utilise blockchain as to why. We wanted to layout (in simple terms) why blockchain will be so transformative for the insurance industry.
How blockchain will eliminate fraud for insurance companies
One of the main reasons some insurance companies are engaging with Yotta is to see how blockchain can reduce fraudulent claims. Fraud, according to the Association of British Insurers, cost the industry £1.3 billion claims in 2016 and there were 125,000 fraudulent claims. Of course, the claims found to be fraudulent will only be a proportion of the actual non-genuine claims — it really is the tip of the iceberg. So, how can blockchain stop this?
The fundamental point that insurers need to know about blockchain is that a record on the database forms an indelible record. This indelible record cannot be altered, this poses serious upsides for insurance companies. A cross-industry, blockchain database could allow Insurers could check police reports and previous claims with ease. Good or bad risks are added to this database, the uninsurable would be rooted out quickly and good risks will be rewarded accordingly with lower premiums.
How blockchain can save insurance companies money
Notwithstanding the point above about minimising fraud, there are other ways blockchain can help insurance companies save money. Many insurance companies, especially large ones, will often have disparate systems and siloed operations. Life insurance could operate on one system and motor insurance could operate another. However, wouldn’t a high-risk driver also pose a high risk for life insurance? Quite possibly and, by having a truly indelible ‘single customer view’ operations can be streamlined and data shared across organisations. There are some GDPR considerations here and we’re not saying blockchain is a panacea but the possibilities are compelling.
How can blockchain make insurance companies more secure
The security aspects of blockchain are one of the main reasons so many insurance companies want to invest in blockchain. Not a day goes by, it seems, that one bluechip company or another has experienced a major data breach. The fact that data is cryptographically secure makes the kind of hacks seen by the NHS, BA or Talk Talk unfeasible for even the most sophisticated of hackers. The cryptography that is fundamental to blockchain is one its major attractions to any company that handles sensitive data. The insurance industry holds some very sensitive data, hence why blockchain will truly transform the way insurers asses risk, payout and even run their operations.
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