
// Blockchain
How to Use Blockchain in Insurance: 7 Use Cases
// Blockchain
The insurance industry is a huge market. So, only in the USA in 2017 the volume of paid net insurance premiums amounted to 1,2 trillion dollars. However, despite such volumes, the industry is experiencing great difficulties, due to which insurance companies lose more than 80 billion dollars every year. Most of the problems are fraud, poor quality data or their lack, as well as the overall inefficiency of business processes.
Blockchain allows you to open up new opportunities in insurance, solve some of these problems and significantly modernize the industry:
Most of the fraud is associated with the enormous complexity and inefficiency of information exchange between various market participants, with each party using its own database and not in a hurry to share information with other companies. As a result, when insurance claims are moved from the insurer to the insurer and the reinsurer, companies along with the document transfer a minimum of data. This creates opportunities for criminals to make several claims for different losses to different insurers for one loss.
Blockchain solution. The problem of fraud can be solved using an industry-wide centralized repository of information, which will operate algorithms for the detection of chronic offenders, repeated statements, data inconsistencies and other signs of fraud. Similar solutions are already in place in other sectors, such as credit bureaus and multi-listing (MLS) real estate.
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Thus, the 2017 Change Healthcare report found that 9% of health insurance claims are rejected, which is accompanied by appeals. Each appeal response leads to a cost of $ 118 per claim, or $ 8.6 billion in total administrative costs. These expenses are compensated by insurers by increasing the cost of insurance services.
Blockchain solution. The technology allows you to create a single version of the document of claims, the management and filling of which will be carried out automatically. This allows you to achieve effective management of relationships with the service provider, increase their transparency, speed and flexibility.
First successes (cases):
In the insurance industry, the KYC procedure must comply with global anti-money laundering standards that have put forward the Financial Action Task Force (FATF) and the International Monetary Fund (IMF), as well as local legislation, if any. There are no separate rules and standards for the KYC procedure in insurance, but usually it takes place in three stages:
Blockchain solution. Insurers can create or use an existing blockchain solution for KYC, where all documents are written to the distribution registry and encrypted using cryptography. Access to documents will be available only with the help of encryption keys (open and one-time closed) that are available to the client. Using these keys, the client will provide access to documents for a limited time sufficient to verify them.
This approach will allow users to retain full control over their data, which is important for complying with a number of laws relating to privacy and data protection. For example, the rules of the European "General Regulations on data protection" (GDPR). In addition, the transition to the blockchain will reduce the time and cost of KYC checks.
First successes (cases):
Under the current approach, the reinsurance transaction is processed manually and is determined by one-time contracts, which leads to difficulties, since each contract covers a partial risk or a specific event. Problems arise when an event occurs. It may take up to three months to make a decision on a contract. And if you consider that the insurer usually concludes a reinsurance contract with several companies, it becomes clear why reinsurance leads to an increase in premiums by 5−10%.
Blockchain solution. By the estimates of consulting company PricewaterhouseCoopers, the introduction of blockchain in the reinsurance process will reduce the associated costs by 15−25%, which for the industry will result in 5−10 billion dollars in savings. The main way to achieve savings is to use the blockchain's ledger, which will allow insurers to quickly and safely transfer information about insurance policies.
First successes (cases):
Blockchain solution. Blockchain technologies can help bring together suppliers and consumers of microinsurance on one site, giving them the opportunity to enter into direct insurance transactions. Such platforms will facilitate simple, transparent and peer-to-peer contracts, as well as help circumvent corrupted bureaucracy.
First successes (cases):
There are several problems with peer-to-peer insurance:
First successes (cases):
Blockchain solution. When the payment can be reduced to the formula “if the parameter on the sensor reaches parameter X, then the insurer pays the client the amount Y”. Such an algorithm can be easily digitized and automated using smart contracts. This will speed up payments and allow insurers and policyholders to save on administrative costs.
First successes (cases):