Article Synopsis :
“Blockchain will transform the insurance industry value chain” by BearingPoint, asserts, as the title suggests, the revolutionary possibilities of blockchain technology and smart contracts will enable new business models and product solutions, transforming the insurance industry for decades to come.
Blockchain-based “smart contracts”, i.e., enforceable digital structures supplanting traditional insurance contracts (and other legally binding contracts), offer a number of powerful advantages over the status quo, including:
- Transparency – Every party connected to the smart contract – from the primary insurer or reinsurer all the way to the repair shop or policyholder – is able to “see” the elements of process important to them.
- Security – Blockchain technology makes it possible to reliably control access and information rights, ensuring failsafe compliance with data protection laws.
- Real-time updation – Changes to business processes are immediately and automatically shared with all involved parties.
- Flexibility – The technology of blockchain-based smart contracts may be applied to other business processes in the insurance value chain.
Smart contracts rely on blockchain technology to manage distributed registers. Every single entry into the register is stored in separate ‘blocks’ and may be used as specific steps of a business process. A completed block cannot be altered retroactively and is part of a ‘chain’ of other blocks, which is where the name ‘blockchain’ derives. The distribution of blocks allows for decentralised validation and examination of entries. Using an industry standard—yet to be designed—it will be possible to map a variety of process steps within the value chain of an insurer, from policy origination through final claims settlement.
Challenges to blockchain adoption are as follows:
To identify potential blockchain use cases, insurers should look for business processes executed manually, or which typically involve manual intervention. Three specific recommendations:
Electronic SEPA mandate: Blockchain to ensure the legality of debit retrieval. Using the identification procedure of the bank, an electronic SEPA mandate is produced, which serves to legitimise the insurance company in relation to the customer, thereby making paper mandates obsolete. SEPA pre-notifications can also be issued and stored digitally in this way.
Claims processing: Customers increasingly use the internet and apps for claims handling. With smart contracts, claims processing can be enabled automatically and carried out by external service partners with the entire process documented through blockchain technology. Once services have been carried out and documented electronically, claim payouts may then be initiated on a fully automated basis.
Co-/re-insurance: In cases of significant risks being insured by multiple insurance companies, blockchain technology can establish an automatic data interchange between involved parties and, where applicable, relevant service providers. In the event of contractual amendments or damage claims, all relevant parties are informed immediately. With smart contracts, policy origination could also be automated, including the automated selection of participating co- or re-insurers.
Link to Full Article:: click here
Digital Insurer's CommentsWith every blockchain article we review we grow more bullish on the technology. Will it be as revolutionary as the internet itself? That depends on standards development. If the standards are worked out, then, yes, blockchain will be huge, like, as quoted in report, “email for money.”
What should you being doing now in preparation? Either internally or with partners, you should:
- Create strong proofs-of-concept
- Model blockchains tailored to your specific business processes
- Gain a better understanding of the technical and practical implementation aspects of smart insurance contracts
Link to Source:: click here