5 key benefits blockchain solutions can provide to insurers

Blockchain is predicted to remove 15%-25% of expenses cost and deliver an industry-wide saving of close to $5-10 billion in the reinsurance industry alone, and this is only the beginning.

While insurers are just beginning to dip their toe in blockchain technology, early adopters argue that blockchain can lead to greater efficiency, reduce fraud and increase transparency across the claims process.

From parametric to commercial co-insurance, here are 5 key benefits blockchain solutions can provide insurers.

Related: Year in review: 5 factors affecting the insurance claims industry

Reinsurance

Blockchain has the potential to provide full visibility between the cedent and the reinsurer. This provides a full history of claims, thereby enabling the ability to price the risk in full and reduce capital slippage as claims payments delays can be removed as part of the contracting process. Prior loss, payroll, property, location and other like information will be entered as transactions on the ledger for the underwriter to see in real time.

Related: Shifting sands: Assessing the current reinsurance marketplace

Parametric insurance

Parametric insurance is ideal low-hanging fruit for companies looking to experiment with blockchain as it’s the perfect use case for smart contracts. A parametric insurance contract pays out a set amount of money based on a simple business rule — or parameter. This parameter is based on a data point that is agreed upon in advance and published by a third party. Assessors provide data based on either physical assessment of damage or through models. With this in place, parametric insurance products could be integrated accurately and efficiency, with trust, implemented on both sides of the transaction.

Related: Closing the protection gap with parametric hurricane insurance in the U.S.

Proof of insurance

When dealing with proof of insurance, most customers think of the little card that’s mailed to them after signing up. When a client requests proof of insurance, the brokers must provide the proof manually, but this process could easily be automated and verified with blockchain. Cryptographic proofs can be embedded to ensure that the proof of insurance has not been tampered with and is for a specific time period of coverage.

Related: Consumers still have major misconceptions about their insurance coverage

Commercial co-insurance

Typically, commercial insurance involves a syndicate of co-insurers and an overall lead that is responsible for managing the entire lifecycle. Blockchain enables co-insurers to have access to the same, up-to-date data simultaneously across the lifecycle, including claims. This reduces manual effort to rekey in claims data from Bordeaux reports and enables automated and faster payments.

Related: Agreed value, coinsurance and deductibles

Internet of Things/Telemetry

An increasing trend in product innovation is the ability to price risk based on real-time data such as usage. The use of sensors and the world of IoT can provide more data than ever that can be used to track all aspects dealing with insurance. This can include dynamic changes to pricing based on how a policyholder drives their car, or to notify an insurance company of a fault or loss so that first notice of loss is expedited and a garage within the network can be alerted and prepared. Blockchain provides the data and transaction rail that will enable these devices to be able to communicate and processes to be automated.

Related: IoT shakes up operations and underwriting

Rethinking insurance with blockchain

Blockchain technology is still in early stages, and we’re just starting to discover its applications in the insurance industry. Widespread adoption of blockchain is happening sooner than you think and it’s important to start thinking how it could help your insurance business in the near future.

Ben Jessel is the head of growth at Kadena. He can be reached at ben@kadena.io. 

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