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Blockchain has the potential to disrupt and drive monumental shifts in the way customer and insurers interact. For the uninitiated, Blockchain is the underlying architecture beneath the digital currency bitcoin that allows all parties to reach a consensus using a series of distributed ledgers that enable trusted interactions to occur without requiring central control. Blockchain offers a paradigm shift that has the opportunity to fundamentally disrupt financial services by transforming processes from the digitized yet paper-originated versions to truly digital transactions. In fact, some economists predict that blockchain could save the financial services industry $20 billion. The insurance industry is expected to experience similar disruption.
As it stands today, conventional insurance is driven by a series of manual human triggers—quote, submission, underwriting, compliance, issuance, FNOL and more. Insurers are riddled with inefficient processes in every part of the value chain, which creates a plethora of opportunities to leverage a technology like blockchain. Fundamentally, blockchain technology is a series of distributed ledgers that allows for trusted interactions to occur with immutable audit trails. The concept of a “Smart Contract” in a blockchain, associated with an event or an object, would allow for on-demand risk assessment with just-in-time underwriting based on simultaneous access to a single set of trusted facts, shorter duration, event-based personalized, insurance products and dynamic claims events without first notice of loss (FNOL), all without a customer trigger or fraud. As a result, this will dramatically lower transaction costs and risks, lower premiums, revolutionize the customer experience and expand the insurance customer base.
Essentially, having trusted blockchain ledgers of various events and identities could eliminate the need for the human triggers. For example, types of insurance products and experiences achievable with blockchain include:
Travel insurance: The policy could be “activated” at the time of purchase of a cruise ticket, “de-activated” when the cruise ship docks at its final destination, and trigger a claim if the cruise ship could not depart due to a weather event.
Rental Car Insurance: The policy could be “activated” at the time the car leaves the rental garage, “de-activated” when the car is returned, and trigger a claim if the on-board telematics device detects a crash or other problem.
Pay-As-You-Stay Home Insurance: The policy could be “activated” at the time the consumer unlocks the Wi-Fi-enabled smart home lock, “de-activated” when the house is locked, and trigger a claim if the IoT smoke detector, water pressure detector or security system detects an anomaly.
Crop Insurance Claims: Weather data could dynamically trigger smart contracts for crop insurance at the right thresholds and allow farmers to be compensated for weather based losses and enable insurers to limit fraud with lower cycle times.
Health Insurance Claims: Claims could be instantly filed where the claim is triggered when the nurse or PA files the patient file and tests into a trusted ledger where all your health records are stored.
Patient Record Management: The health records of individuals could be stored on a ledger linked through biometrics to identity ledgers allowing consumers to view their health records in a holistic but secure manner. It would also allow individuals to grant physicians and payers access to certain sets either on-demand or for defined durations of time in order to receive better treatment and insurance options. It would enable care givers to have a digital 360 view of patient diagnostic and treatment histories, something that is unachievable today.
The possibilities are endless!
The maturation of IoT, the prevalence of a sharing and comparison economy, the re-emergence of peer-to-peer insurance and the digital adoption by consumers at large have opened the gates for insurers to immediately take advantage of blockchain to fundamentally re-define the insurance experience. Legacy insurers will be challenged and disrupted by new entrants who are leveraging this technology and materially altering customer expectations of price, experience and speed.
Blockchain has the potential to be a significant inflection point for the insurance industry and the technology is being rapidly shaped to play such a role. It’s up to insurers to take advantage of this technology with imagination and fortitude.