Mainstreaming Blockchain in Insurance: Enhancing Efficiency, Transparency, and Fraud Mitigation

• Himanshu Patni
• June 13, 2023
• BLOG, TELECOM & IT
• Blockchain Market, Blockchain Market Growth, Blockchain Market Share, Blockchain Market Size, Blockchain Market Trends, Blockchain technology
• 0 Comments

A Blockchain is a shared digital ledger maintained by a network of computers offering a secure, direct method to deal with each other, without an intermediary like a government, bank or other third party. It maintains a decentralized record of transactions. It uses distributed ledger technology; it facilitates recording transactions across distributed infrastructure over public or private networks.

Smart contracts– A computer program that automatically controls the transfer of digital assets between the parties and provides a real-time view to all the stakeholders. It works the same way as any traditional contract works; a traditional contract is enforceable by law; smart contracts are enforceable by programming code (executed automatically under certain conditions).

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Ethereum– Emerged as an advanced platform to make custom contracts; a blockchain network that introduced a Turing-complete language, a term usually used to describe modern programming languages such as C++, python, etc. It is an abstract statement, stating that a programming language is turing complete provided, it computes any function computed by a turing machine.

Due to the ability of Ethereum to create various decentralized applications, it has applications in various sectors. Blockchain uses various consensus mechanisms to reach consensus about the state of distributed ledger. The consensus mechanism used on Ethereum is Proof of Stakes (PoS). In the process called staking, value/money is at stake under certain conditions. It is responsible for validating entries in a distributed ledger and processing transactions.

The Blockchain in Insurance market is expected to reach 67.9 billion by 2030 at a CAGR of 39.2%.

Examples of Blockchain in Insurance

ConsenSys Software– Blockchain software addresses flaws within the insurance industry. The company’s tools facilitate building decentralized networks for commerce. Insurance companies can benefit from automated audits and immutable claim records.

Guardtime– A company develops blockchain solutions. The company teamed up with EY, Maersk and Microsoft to implement Insurwave, a blockchain-based marine insurance platform that manages risk, establishes an immutable chain-of-shipping and automates transactions to help insurance companies.

Tierion– The Company’s blockchain technology provides solutions in the area of claims processing. It can record, track and verify data, reducing the time and money spent on the process of each claim.

Kaleido– It provides Blockchain business cloud to insurance companies; they can store insurance information and use it to verify claims and track payments. It helps in detecting identity fraud and helps insurers to remain in compliance with industry standards.

Conclusion

Blockchain can facilitate the insurance industry by improving customer engagement, enabling cost-effective products and the development of new products connected with IOT devices. Technology can bring efficient gains, transparency, cost savings, fraud mitigation, and faster payouts. The low cost of smart contracts provides an opportunity to penetrate the underinsured developing world. One limitation of the blockchain technology is high-speed/high-volume transactions, due to its consensus validation mechanisms.

However, the accuracy of the technology depends upon the availability of clean data. Acquiring clean data is a challenge that needs to be resolved. Clear regulatory frameworks and standardization are required for the implementation of smart contracts, and the legality of smart contracts is unclear. Cybersecurity is another significant concern. Recent incidents have shown that new types of attacks are coming into existence.

Author: Abhishek Saini