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What is insurance?
Insurance is a method of hedging against monetary loss. It is a type of risk management that is mainly used to help against the threat of an unexpected misfortune.
A policyholder can report an accident or damage to a broker and transmit it with the necessary data to the insurance specialists, in particular the insurer, if necessary the reinsurer. Claim accommodation is confirmed to the insured by a receipt.
From that point forward, the claims representative may request additional data for the claim via an external source. If all conditions are met after this step, the claim will be approved and the installment will be started via the insurer’s claims agent. Insurance is exposed to a variety of fraud schemes. From splitting the insurance plan after divorce to hiding medical diagnoses. So how does blockchain help in this area?
The future of blockchain technology is seen as the greatest picture of the fourth industrial revolution and a potential disruptor for some organizations and businesses, including the insurance space. While the technology is still in its early stages, it has only just shown what it can do: streamline printed materials, increase information security, and save organizations costs by removing boring case forms.
Blockchain Technology Summary:
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The blockchain is a comprehensive, decentralized, and reliably updated log that keeps track of the significant number of exchanges that have taken place. Blockchain systems are designed to record everything from physical resources to electronic money and are open to all assemblies contained.
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After the verification process, the block of a transaction is timestamped and added to the blockchain network in a direct sequential request. The additional block is then connected to previous blocks, creating a chain of blocks containing data of every transaction ever made in the history of that blockchain.
How blockchain technology can benefit the insurance industry:
The blockchain was known to most through bitcoin, but its applications go beyond the mere recording of electronic money. It can also enable inventive and challenging changes in industries other than finance, such as the insurance business model. Aside from recording electronic cash and financial transactions, this technology can become part of insurance and healthcare projects.
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An insurance company mainly consistently manages various procedures involving an insurance contract to be signed. The processes can be anything from purchasing an insurance policy, to evaluating a customer, to claiming or administering a fraudulent policy.
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As blockchain technology deals with smart contracts, insurance industry specialists claim that this technology can potentially transform the way insurers engage with customers. Insurance industry depends on lots of data, similar to different industries, blockchain can end up enabling all or most data related transactions for this industry through smart contracts.
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The smart contract can facilitate, execute and enforce the negotiation or application of an insurance contract through blockchain technology. Insurance contracts are unpredictable and difficult to understand, so the smart contract can increase productivity in the insurance appraisal chain wherever time, effort, or money is expended to confirm information before transactions are prepared.
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Key Points of Blockchain Impacting the Insurance Industry:
1. Strengthen trust:
There is a trust crisis in the financial services industry. Despite the fact that the big banks are the focus, the loss of confidence affects all companies. A lack of trust, high costs and inefficiency in the insurance business contribute to the extremely high level of underinsurance. Blockchain technology encourages customer trust as it offers simplicity and transparency.
2. Increase efficiency:
While changing insurance agencies or healthcare providers know how wasteful the information section process is to start a coverage or care. Additionally, customers have an undeniable fear of losing control of their own information. Blockchain offers a solution for propulsion efficiency and security that would allow the individual information to be controlled by one person while the confirmation is registered in the blockchain.
3. Improved claims processing through smart contracts:
As of now, both the insured and the insurer have problems that blockchain and smart contracts could solve. Insureds often discover long and mysterious insurance contracts while insurance agencies battle another scam that is out of the ordinary. Blockchain and smart contracts would both benefit from the responsive and transparent monitoring of claims. And it starts with recording and confirming contracts on the blockchain. At the time of filing a claim, the blockchain could guarantee that only significant or valid individual cases will be paid. But if the network finds multiple cases where claims have been filed from the same accident, the blockchain could trigger payment of the claim without human intervention, improving the speed of claims processing.
4. Fraud detection and prevention:
One of the most compelling reasons why insurance agencies should explore blockchain is its ability to detect and prevent fake or illegal activity. An estimated 5 to 10 percent of all cases are fraud. Blockchain technology’s decentralized storage and historical record that allows clients, policies and transactions to autonomously verify authenticity. Every insurance agency needs to take a step today to understand how blockchain innovations can impact the way they work together today and in the future.
This is how blockchain technology will help or participate in an insurance industry in the future. In case you need a concepts refresher or want to read the latest news related to blockchain and cryptocurrency technology, stay tuned to us at this time.
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