Article Synopsis :
Blockchain is a potentially revolutionary technology, but will it, per a World Economic Report prediction, account for 10% of global GDP by 2027? What we do know is blockchain’s impact will be felt in financial services – including insurance – first.
“Blockchain a potential game changer for life insurance” from Cognizant explores blockchain’s potential influence on life insurance markets specifically. Blockchain can surely help life insurers simplify death claims processing, which currently requires an already traumatized beneficiary to undergo a series of time-consuming activities around basic claims. And the paper features a blockchain solution for streamlining all of this.
The paper also provides representative use cases around how life insurers can adopt and creatively leverage blockchain to automate reinsurance claims, process subrogation claims payments, and ensure better auditability.
Bockchain will impact not only insurers themselves, but also stakeholders involved in all insurance-related transactions. Consider the following:
1. Data Protection and Standardization Impact: Blockchain solutions will ultimately require agreed-upon standards. Various opportunities will emerge when regulators and insurers work together to develop blockchain proof of concepts (PoCs). With better understanding of the technology, regulators can better define data exchange standards and laws thereby helping industry players eliminate potential roadblocks to live implementations. This will also help reduce fraud and build efficiencies in the audit process.
2. Fraud reduction impact: Blockchain, in theory, ensures absolute end-to-end auditability. Regulators can participate in PoCs aimed at fraud reduction, thereby encouraging participation from others across the blockchain network.
3. Third-party intermediaries, and the impact of insurance marketplaces and aggregators: Blockchain adoption can prove to be a major inflection point for third-party aggregators/brokers/intermediaries. If an insurer consortium, for example, launches a marketplace to sell insurance directly to consumers, it could pose a serious threat to the intermediary business. Intermediaries, on the other hand, can build a blockchain platform inviting carriers to sell on it.
Other use-cases highlighted in the paper include:
- Blockchain for automated underwriting, dynamic pricing, product development and automated claims for auto policies.
- Blockchain for complex procedures like reinsurance and subrogation in auto insurance claims.
- Blockchain for policy purchase and automation
- Blockchain for managing independent agent contracts, toward reduced commission leakage, proactive license management, proactive checks for active/inactive agents, and automated claw-back commissions/arrears processing.
- Blockchain for new commercial models, reinventing established insurance processes, and increasing carrier capacity.
Insurers looking to experiment with blockchain should, per this paper, consider the following:
- Start by evaluating how blockchain aligns with existing IT strategy
- Create a plan for developing capabilities and understanding blockchain’s potential applications and implications across various lines of business
- Take the lead, driving the adoption of blockchain-based solutions across various business stakeholders. Sell blockchain’s massive potential to create more secure and streamlined operating systems, capable of accommodating disruptive business models
- Consider joining large industry consortiums; or, as an alternative, work to build smaller consortiums with key stakeholders
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