Article Synopsis :
With increasing investments in blockchain-related startups focused on insurance we can expect to see new methods of measuring and pricing risk as well as innovative new approaches to customer service, all delivered via blockchain’s ‘hackproof’ environment.
Willis Tower Watson’s paper “Want to get an insurer’s attention? Just Say Blockchain“ gives a brief history of blockchain development, outlines its unique characteristics, and explores its potential capacity to disrupt the insurance industry.
What makes blockchain so intriguing? Its ability to handle decentralized transactions that are fully encrypted and absolutely secure. Blockchain’s ‘distributed ledger’ technology may help insurers solve many long-standing challenges including reduced administrative and claim processing costs, increased accessibility to underserved segments, increased transparency and ’instant’ insurance sales.
InsurTechs and carriers aren’t the only ones engaged in trying to unlock blockchain’s huge potential. Non-traditional players like Google and Alibaba are actively exploring direct-to-consumer sales models – including insurance – utilizing blockchain.
Specific use cases for Blockchain in insurance include:
- Event-triggered smart contracts with automated claims, self-executing contracts, reduced fraud and hence improved customer experience.
- Increased back-end efficiency with the potential to decentralize and enable fully digital and secure market operations with fewer errors and lower data redundancies with lower processing delays and transaction costs.
- Disintermediation with decentralized carrier consortiums, automatic identity validation and self-executing transactions.
- Better pricing and risk assessment with real-time personalized products triggered by automatic data sharing for analytics and pricing and leveraging connected devices.
- New types of insurance such as P2P, shared economy, spotinsurance, and hybrids – products which are proving more transparent and less costly. These new forms of insurance will be fuelled by social media and crowdsourced platforms.
- Reaching underserved markets such as microinsurance, with blockchain’s distributed database structure enabling better pricing through simplicity and efficiency.
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Digital Insurer's CommentsBlockchain is decentralized, cannot be disrupted or hacked, and all data flows are public (though fully encrypted). These, blockchain’s biggest assets, are also it’s most glaring flaws.
Comparisons are made between blockchain and the World Wide Web. Recall insurers were slow to push insurance through the Internet for security reasons, and now it’s commonplace. Will the same thing happen with blockchain?
Active and growing Blockchain ecosystems like Ethereum and R3 CEV are betting so, as is $650 million in funding for blockchain related startups in financial services in 2016 alone.
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