Introduction

The concept of insurance has existed since ancient times. Almost every generation has used the insurance concept to control the effects of damage. Much has changed over the years; the development of technology has brought some major shifts in the present world, but the insurance sector remains backdated. Despite having various online insurance options, many people still prefer to work with agents and get insurance from them.

As significant improvements are being made in the sector, the introduction of blockchain or a disruptive ledger is revolutionary. It uses advanced cryptographic techniques to create a safe and secure place for data that prevents window dressing and improves transparency.

A blockchain can record anything from physical to digital assets; once a transaction is carried out, it is grouped and then protected in an online block that is available on a larger global network, to which only authorised parties have access.

The Advantages of Blockchain

The key advantage of introducing this technology is data security, and it can also create a clear audit trail. Also, as blockchain systems are unchangeable and does not require fault by any central authority, the use of a distributed ledger creates a new path for much more secured collaborations between competitors by removing the qualitative aspect of trust between third party organizations.
The other advantages are

Allieviating Paperwork

Insurances require a lot of red tape, which creates delays and makes the parties lethargic. The blockchain technology will speed up the process. It would not only create a hassle-free sign-up for the policyholder but also make the document verification process for the insurer easier.

Easy Claim Verification

Since everything is handled in real time, all the important dates related to the insurance would be updated in a timely manner. It will make the claim process simpler and smoother for both parties. Hence, a system would be developed where claims are managed, verified, and paid quickly.

Minimising fraud

When everything is online and in real-time, the chances of fraud are automatically reduced. No party can cheat on the other, and therefore, trust and goodwill are always maintained.

Ease in health Insurance

After the introduction of blockchain in the health sector, secured data like medical reports, charts, receipts, etc. can easily be shared between health providers and the patient. The same block data can also be made visible to insurance companies, and therefore they can keep track of their insurance holders. This will make the process of seeking and claiming such insurance easier.

General improvement of value chain

Once everything is updated regularly and even the customer has access to the same database, a flow of information and payments will ensue, and we can say that the blockchain technology will create value for both sides of the table.

Blockchain implementation issues in the insurance market

Though the idea is a win-win for both parties, its introduction in the market isn’t easy, and the insurance is bound by many complications and legalities, making it completely cloud-based and block-based, which is risky. The blockchain technology still cannot overcome the legal and regulatory hurdles.

Moving towards a blockchain-backed insurance industry can be a distant dream, but companies like Allianz and Swiss Re and various new start-ups are finding a solution. From the perspective of an industry as a whole, insurance companies have to align around standards and limitations within blockchain technology. While this system can provide insurers with better means for collaborating and sharing data, the insurers themselves should be willing to work together.

The technology itself must also be further developed to overcome the existing hurdles. Public blockchains, where each transaction on the ledger is visible and accessible to everyone, are unfeasible for the industry due to privacy and security concerns. Private, active, and permissioned blockchains are yet to be developed.

Lastly, the insurance industry is highly regulated to safeguard customers from misuse and cannot risk a breach of data. Legal and regulatory frameworks for insurance services need to evolve and provide a proper framework for this technology to be put into practise.