Blockchain technology can have a far-reaching impact on the insurance sector. The insurance sector in the West is very large because it is estimated to reach $6.0 trillion in 2023 at a CAGR of 1.3% over the past five years. However, the sector is beset with challenges such as false claims, poor customer experience, and credibility crisis. Given these challenges, blockchain technology can provide actionable solutions to improve the prospects. Therefore, it is important to explain the positive impact of blockchain technology in the sector.
A Few Benefits of Blockchain Technology in the Insurance Sector
The few benefits of blockchain technology in the insurance sector are as follows:
Verify and Restrict False Claims
Blockchain technology has an immutable ledger system in which each transaction is recorded on a ledger. The exchange platforms have this feature to minimize the chances of fraud. False claims are the biggest challenges in the industry. In the US alone, as per the Coalition Against Insurance Fraud, Americans suffer $80 billion worth of damage every year due to insurance fraud.
The sector is battling hard to minimize fraud cases by using smart analytics and other methodologies. However, the fraudsters continue to have an upper hand. Given this, blockchain technology’s innate feature of time-stamped transactions can make it very hard for fraudsters to commit fraud. Tracking also becomes much easier.
Improves Customer Experience
The insurance sector often suffers from poor customer service. This phenomenon is harming the credibility of insurance companies. Therefore, retaining customer loyalty is a priority because many rivals in the insurance sector offer similar schemes for customers. Blockchain can minimize this problem by using smart contracts that have automated processing.
Boosts Credibility
In the insurance sector, credibility matters to many customers. The major advantage of blockchain is that it can create trust among different entities. Consensus algorithms help in improving a company’s suitability and immutability. These algorithms also help in creating smart contracts and benefit the insurance industry. When the industry uses these contracts and ledgers, the chances of fraud are reduced considerably.
Automation
Blockchain can lead to more automation in the insurance sector. Therefore, it can streamline and accelerate the lengthy processes associated with the sector. Blockchain can therefore save time, money, and effort by substantially cutting down operational costs. This in turn can improve the profitability of many insurance companies.
Proper collection of Data Storage
The insurance sector needs effective storage mechanisms. It is not an exaggeration to say that the entire sector thrives on analyzing hard data. Therefore, blockchain can lead to better use of technologies such as the Internet of Things (IoT) and Artificial intelligence (AI). The companies can also make informed decisions on insurance premiums.
Also Read- An Overview of Blockchain As A Service (BaaS)
Bottom Line
The positive impact of blockchain technology on the insurance sector can provide enormous respite to millions of employees and users alike. The sector can improve its profitability, and efficiency, and ensure better services by integrating blockchain. Fraud cases can be reduced substantially if insurance companies proactively take precautionary measures by using blockchain. Transparency, immutable ledgers, traceability, and time stamps are some of the greatest benefits that the sector can gain from this technology.
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