The insurance industry is one that should be built on trust at its core. However, one of the most significant challenges in the insurance industry is the lack of trust between the insurance providers and clients. The lack of trust stems from issues plaguing the insurance industry such as fraud, restrictive and complicated compliance issues, and its limited growth. Nevertheless, thanks to insurtech, the insurance industry has a chance to rise above the complications and emerge as a leading industry in the digital world. That is especially so thanks to the integration of insurtech with digital systems such as blockchain and the Internet of Things (IoT). Blockchain, in particular, holds the greatest potential to change the insurance industry for the better. The question is, how exactly will that happen?
The impact of blockchain on the insurance industry
Like many other industries in the digital age, the insurance industry is in a precarious position where it must evolve or die. Although blockchain might not provide an effective solution to all the problems facing the insurance industry, it tackles some of the core issues and propels the insurance industry to adopt better reforms. So, what are the changes brought by blockchain, how are they different from past practices and what effect will that have on the industry?
Although we understand the risks of poor security in the digital age, we have yet to achieve a perfect level of cybersecurity due to a number of reasons including ever-evolving technologies, poor government policies, smarter hackers, and complacency on our part. However, as evidenced by Bitcoin as an anonymous cryptocurrency and the level of security it offers, blockchain is one of the best security options for any disruptive tech out there.
Through blockchain in insurtech, the industry can eliminate fraud, hacking, and other security problems such as lack of client privacy, which are all issues that have been affecting the industry for years. The blockchain public ledger guarantees privacy and accountability, which not only improves security but also trust between the clients and companies. Additionally, relying on the blockchain the third-party transactions will be more transparent and secure, even going so far as reducing costs of operations if the entire process is automated.
Seamless tech integration and data management
Digital transformation for any industry at this point means adapting to and making use of big data. That is especially so for the insurance industry which is taking a greater interest in the IoT. However, data management is an issue that has affected the insurance industry for years and piling on more comprehensive data just adds to the problem. However, with the help of blockchain tech, data management becomes more streamlined since all the records are automatically created on the ledger, which acts as a coordination point. The company can then use the ledger as a reference point when needed. An added benefit is that this allows for the IoT to be integrated into insurtech seamlessly and even going further to boost the benefits obtained from the collected data, especially since the core problem of the IoT is the lack of security.
By eliminating the human element in most of the company processes, the convenience enjoyed by both the company, clients and other related parties increases tenfold. Convenience, in this case, is brought about by multiple benefits enjoyed by the insurance industry thanks to blockchain. For instance, thanks to smart contracts, the amount of time spent to process claims is reduced, which also reduces the processing fees since the process is automatic. Additionally, increased transparency and streamlined information sharing also contribute to the convenience enjoyed by the clients and other parties.
Blockchain is an impactful disruptive tech that will change the insurance industry for the better. However, that is only if more companies adopt and implement policy reforms that support the integration of blockchain into insurtech. Nevertheless, companies that integrate blockchain early on are bound to experience greater growth in the ever-changing digital age.